I come from a family of pilots, and growing up I read quite a bit about the history of flight, with a focus on the pilots and scientists that made our country great. One of those individuals was an aircraft engineer and designer named Clarence “Kelly” Johnson, the designer of groundbreaking aircraft such as the U-2 (Dragon Lady) and the SR-71 (Blackbird). As the head of advanced development projects, his goal was to:
- Get results cheaper, sooner and better through application of common sense to tough problems.
- If it works, don’t fix it.
- Reduce reports and other paper work.
As buyers, planners, inventory investors and managers, we have a simple but important role: provide excellent customer service by making sure we have the right products, while keeping inventory costs as low as possible.
Supply Chain Planning (SCP) provides a myriad of tools and functions to help you in this role, and through Supply Chain Analytics (SCA) you have the ability to manage data and reports.
With SCA, it is entirely possible to be overwhelmed with the number of available reports. While all of these can provide insight, keep it simple, and focus on select reports that you will review and set to a frequency.
By focusing on select metrics, we can monitor the health of the company and act when needed. As mentioned above, if it works, don’t fix it, but if it’s broken don’t ignore it. To help identify what may be “broken,” I suggest focusing on three things:
- Inventory Levels.
- Demand Levels.
- Service Levels.
Historical Inventory Levels
By watching historical inventory levels, we can catch upward and downward trends. Over time, you will want to respond to the trends and the significant spikes. An increase in inventory isn’t necessarily a bad thing, and may be a result of the company increasing customer and item count. If the spike or trend is unwarranted, then you will want to look at underlying causes, such as forecast accuracy, seasonal profiles, sustainable order quantity (SOQ) changes, order days delay, events, etc. Be sure that downward trends that are not related to seasonality also are reviewed.
Historical Demand Levels
Keeping an eye on demand levels will keep inventory levels in perspective. If item count has increased, or customers have been added, then you will see an increase in demand. If demand increases, inventory may increase as well. What you are carrying should correlate with what you are shipping. Look out for false demand—that is demand that you don’t want to forecast.
Historical Service Levels
Service is king; making sure that the inventory is sufficient to meet service is paramount. It is very important to consider your goal. If you aren’t hitting service level goals, you may need to re-evaluate.
With service, look at both the corporate and buyer level goals. Service attainment is directly affected by inventory and demand. If those categories are in good shape, then you will be too.
An “elegant solution” is a term used in mathematics, engineering and software development to refer to a solution that solves the problem in the simplest and most effective manner. In many cases, it is possible for developers to create code that is more complicated than it needs to be. This code is more likely to cause other problems. For developers, finding an elegant solution can be a greater challenge than solving the problem—or as Leonardo da Vinci's said, "Simplicity is the ultimate sophistication."
Sven Aunapu is the director of LifeLine Services and Education at Blue Ridge, focusing on inventory replenishment and replenishment analytic software and services. Blue Ridge focuses on replenishment investment, not by just reducing inventory or improving service, but by increasing the value of its customers through smarter buyers and advanced solutions for more profitable buying.