Try to understand why inventory is there. If you have a safety stock it is there to be used. If you get variations in demand or supply you expect it to eat into the safety stock — this is a perfectly normal business practice. You don't need to have a knee-jerk reaction and boost inventory levels even further. Know when to intervene and when not to intervene, and get a handle on the real cost of inventory insanity.
Illusory targets, silo thinking and devil-may-care attitudes to inventories must now become a thing of the past. Companies should take heed of what is happening in the banking sector to identify better processes and structures that will help align sales forecasting, supply chain capacity and enable the company to finance more effectively.
By putting in place a rigorous system for monitoring and reacting to market changes, you will succeed in creating a better supply and demand balance and will ultimately gain more reliable and predictable business performance.
About the Author: Jim McKevitt is head of Supply Chain Practice for management consultancy Cairnforth. On the Web at www.cairnforth.com.