It’s a classic conflict: Operations wants to drive inventory down. Sales and Marketing want excess inventory to satisfy unexpected customer demand and avoid stock-outs.
Modern inventory management software alone cannot reduce excess inventory because of the continued fear of stock-outs. It’s time for some changes in inventory management.
This post is based on the Logistics Management article, Inventory Management 101: Time to step up to the plate, by Bridget McCrea, October 4, 2018. Image source: Noel Hendrickson/Getty Images.
1. If safety stock recommendations generated by inventory management technology solutions are ignored, what policy could be implemented to reduce safety stock or dated inventory items at a company like L.L. Bean?
Guidance: Students should review inventory management concepts. Students should find a retailer and perform a quick internet search on that company. Ask the students to develop a process to identify categories of retail inventory based on importance to customer satisfaction. This might include a discussion of ABC inventory analysis.
What should be the policy to reduce safety stock for broad categories based on ABC analysis? How should Sales and Marketing teammates be involved in setting safety stock policy? The goal is to review inventory concepts in a broad application to a retailer. Discussion should include most terms involved in the inventory chapter of the text.
2. How would better collaboration with key suppliers reduce the stock-out concerns by Sales and Marketing?
Guidance: Students should review sourcing concepts. Ask the students to develop a “sales pitch” to the Sales and Marketing executives from the perspective of supply chain managers. Each student team should in some way address collaboration with key suppliers, shorten lead times, and potentially reposition inventory as demand dictates. The goal is to get the students to understand that concerns by Sales and Marketing staff have to be adequately addressed if safety stock is to be reduced.