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Rethinking Inventory Management: More Than a Formula

by Ann Grackin
CEO, ChainLink Research ,

[Editor's Note: For more on the latest research findings in inventory management, join Bill McBeath, ChainLink's Chief Research Officer for Thursday's free webcast, Dimensions of Inventory Management: Holistic Strategies for a Volatile World]

Much of the focus on inventory management in the business literature is on basic formulae approaches-how forecasts, lead times and such affect inventory. And they do.

But the fact is lurking across the enterprise and the supply chain that there are missed or powerful forces that influence inventory policy-both formal and informal. And these influences and influencers create some obstacles and dilemmas on getting a grip on inventory management.

Inventory Policy - Who Calls the Shots

We talked to over twenty companies for a recent research  project we did and our findings were quite insightful  on who and what  really influences inventory policy and therefore ultimately whether the enterprise is caught short without product to fulfill orders, or conversely,  ‘how much stuff is left ' unsold at  the end of season or end-of-life. Here are the top five:

1. Agreements and contracts. Each agreement with customers or suppliers is unique. They have lead times and inventory service level promises. Often these agreements are unseen-not codified or improperly entered into system.  Even larger companies policy on vendor management, consignment, stocking level or days of supply vary by commodity, channel, customer, geography or season.  To combat this, companies often put "standard" replenishment levels or lead times in their systems.  Obviously this maps in no way to reality and causes many planning errors and late deliveries.

2. Over anxious sales. A major influencer ...

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About Ann Grackin

ChainLink Research leads the market in research coverage of issues associated with business integration-the links in the chain.

As CEO of ChainLink, Ms. Grackin and her team have advised global corporations, enabling them to achieve dramatic improvements in business performance through successful adoption of technology. Their client roster spans from SMB's to the world's largest corporations.

Research areas for Ms. Grackin include: ERP for the SMB, B2B Integration and Supply Chain Platforms, and Collaboration Technologies.

Ms. Grackin is a popular speaker and respected writer featured in leading trade publications. The Brief, ChainLink's online magazine, where she serves as Editor in Chief, has attracted over 300,000 readers. She is active in several supply chain and technology industry groups where she has led the creation of supply chain methodologies.

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