Our partner Celestica recently published the following article, ‘Is your company being held hostage by poor inventory performance?’ The authors, Anandhi Narayanan, Senior Manager, Advanced Customer Solutions, Charles Thomas, Director, IT Customer Solutions, Stacey Greene, Director of Inventory Optimization and Robert Rejano, Processes and Applications Advisor, all with Celestica, describe the critical steps needed to drive inventory performance improvements.
Poor inventory performance can create a significant obstacle to growth and profitability. But adopting a strategic methodology designed specifically for inventory transformation can help eliminate the obstacles caused by poor supply chain visibility and open up new opportunities. If you’re looking to increase your inventory performance, we’ve outlined Celestica’s key suggestions and how they helped one company see substantial results.
Establish an executive focus and a transformation team to support it
Like any ‘transformational’ initiative, the process of improving inventory performance begins with understanding the compelling reasons for change. Once urgency is established, building the guiding team, establishing a vision and outlining goals are critical to winning over key stakeholders.
Make it Visible – You can’t improve it if you can’t measure it
Successfully increasing your inventory performance requires integration of data from all sources that make up your supply chain network. It’s critical to create a framework for the data that translates it into one clear body of information. Once this happens, data can then be analyzed in detail. To move from ‘basic analytics’, which gives insight into how the supply chain has operated in the past and what is required for the present and future, to ‘advanced analytics’, requires data to be contextualized in a way that makes it useful at the time when operators need to make a decision. Flexible data models and methods to extract and load data are essential. The key to achieving meaningful results is a centralized data hub where normalization, standardization and storing of data can be performed. This allows the team to quickly develop and modify data models, without relying on multiple outside parties.
Visibility allows you to see precisely how much inventory you have and where. By mapping out the current state and then gathering data to further build an understanding of the inventory, you can take a system-level view of the processes to establish inputs and outputs. This reveals how to best segment data to analyze ‘How Many? How Often? And Where?’ It then becomes possible to understand ‘why’ and to prioritize value-added activities. In order to dig deeper into inventory performance, further analysis using more granular data or new data needs to be done. Organize data in a way that is actionable and disseminate it to specific teams that can influence the result. Contextualizing here becomes critical to driving actions and outcomes, while keeping overhead minimal.
Process and Controls
In a typical outsourced manufacturing supply chain, teams look first at variations between their customer forecast and the executed forecast. Establishing the right controls over investment inventory is critical. It’s also paramount each functional team is aware and responsible for their part in inventory creation, and that they understand how their efforts impact the company’s overall inventory performance.
Once inventory-control initiatives are in place, the focus needs to shift to optimization in order to increase inventory performance. This requires providing targeted analytical capabilities at the time decisions are made. Optimization for growth means managing diverse elements of the supply chain differently. Some areas to consider include:
- Differences in demand patterns and order management models between partners along the supply chain. This will require a tailored focus on balancing the cost-to-serve, customer service level and inventory reduction targets.
- Driving improved management of A-class parts through the development of applications that optimize levers of minimum order quantity (MOQ), lead time and part value. This will help identify areas for improvement.
- Enabling supplier collaboration platforms so operations teams can manage by exception – focusing on those parts and suppliers that have the highest impact on delivery while seeing the immediate responses to transaction status.
- Investing in multi-echelon inventory optimization (MEIO) to take the guesswork out of buffer management in the planning process. MEIO uses analytical models to define optimal levels of inventory buffers at each node in the supply chain in order to achieve service level targets.
Measuring the Success of a Journey
Measuring progress along the way is critical to understanding whether current efforts are bringing about desired outcomes. It’s also an endless process. Success demands widening the scope. Pull in and analyze more data, and continuously restart the process of identifying areas for optimization. Ultimately an organization’s inventory performance will have a significant impact on its competitiveness and growth. As outlined in their case study, Celestica was able to improve inventory performance for one company by identifying the root issues and monitoring key levers through data analytics and visibility. The company went from lagging behind to leading among its peers and was recognized formally for its IT and supply chain management leadership. You can view the whitepaper, including the full case study, in its entirety on the Supply Chain Expert Community.
Looking for more great information from Celestica? Check out these other blogs in our series:
- Inventory optimization frequently asked questions