Our approach to Inventory Management should be flexible and adaptable. Here is why.

Inventory is meant to improve the customer experience and generate more revenue.

Early in my career working for a Tier 1 supplier in the automotive industry, inventory was perceived as a “necessary evil”. Still, in quite a few occasions that small, 3 day finished goods stock prevented major issues for our customers. Also, by not disrupting their supply chains, our scores were always in a position where we could bid for additional business with those customers.

Then I got the chance to lead the Supply Chain Team for a manufacturing company with a complex network of global suppliers and long lead times. The product was alternators for Power Generators, which usually experience large surges of demand after natural disasters like earthquakes and hurricanes. The facility was located in Mexico and the supplier base was scattered around the globe in places like India, China, the UK, South America, Mexico and the US.

Generating a tailored approach to each vendor and commodity was crucial to make the best use of the capital associated with maintaining the right inventory levels to service day-to-day demand but also to capitalize business opportunities when demand spikes happened. Also, negotiating the delivery terms with the vendors was crucial considering sometimes long transit times.

A big a-ha moment came then working in the produce industry, where mother nature acts as the Master Scheduler and huge waves of production come at you, and fast.

The approach to inventory in the produce industry is very different, tailored to eliminate safety stocks of Finished Goods considering the product is perishable. The fresher the product, the better experience for the customers, who in turn come back and do a repeat purchase. However, to support such large amounts of sometimes unexpected production, you also must be ready with significant amounts available of direct materials and MRO’s needed to be able to receive and process such volumes.

A common risk on inventory management? Obsolete and slow-moving inventory. This was experienced with different levels of impact depending on the industry, but it was definitely a challenge present in each one of them. In some cases, the impact was limited, but in some the other was significant. What I found is that in most cases obsolete and slow-moving inventory was caused by not having a strong SIOP process or by not having sufficient alignment or communication with customers.

Having experienced all the above and having had the chance to generate different strategies to manage inventory for these environments, what I’ve learned is that:

(a) inventory is not bad if used wisely,

(b) inventory should be used to improve our customers’ experience, and

(c) in the end, inventory should help companies generate more revenue.

(d) Our approach then as Supply Chain leaders is to be adaptable and flexible to the needs of the industry we work on.