INVENTORY LIABILITY—THE SCOURGE OF SUPPLY CHAIN MANAGEMENT

Some things never seem to change in life. Excess inventory is one of them. In spite of all the investment in state-of-the-art demand and production planning systems, improvements in inventory management have been marginal at best. In fact, these advanced planning systems may be part of the problem. They're designed to optimize resources within known constraints and tend to be static, generating a snapshot of data that's almost instantly outdated. As changes occur, like a drop in demand, it can take days or weeks for that information to get massaged into the planning system and shared with contractors and suppliers.

Moreover, planning is only as good as knowledge of constraints—but companies don't know about constraints until they happen. So when capacity bottlenecks, quality issues, shipping delays, or similar problems emerge, it takes too long to determine the impact, identify key risks, and make alternate plans. Inventory is already built up that will become a liability, forcing organizations into major inventory writeoffs and financial losses. Billions of dollars in inventory have been written off in the electronics industry alone because companies are unable to respond effectively to unexpected constraints and changes in demand. This negatively impacts every aspect of their business and the extended supply chain.

Andrew Gort is the former executive vice president of global supply chain management for Celestica and has more than 30 years of experience in material sourcing, procurement, production planning and control, inventory management, logistics, and order fulfillment in both the OEM and CM manufacturing environments.
Contact Andrew at Andrew@andrewgort.com.

The speed of today's go-to-market life cycle—coupled with the complexity of product configurations and extended, global supply chain networks—requires a real-time Response Management solution.

Response Management provides:

End-to-end supply chain visibility to market dynamics.

Impact analysis tools that instantly convey how changes will affect all areas of the business, including supply, demand, capacity, and product.

Real-time event monitoring and a way to communicate changes to supply chain partners.

The ability to conduct multiple "what-if" scenarios using live data the moment constraints arise—supporting intelligent, precise inventory management.

An iterative means to analyze operating and financial impacts for liability exposure.

Alternative performance-driven resolutions for consideration.

As business cycles speed up and margins grow tighter, companies must improve their ability to cope with unforeseen changes as they occur. Response Management technologies provide the tools and visibility needed to proactively manage inventory and communicate and respond to changes, both internally and with supply chain partners, more efficiently and effectively.