CRICOS Provider Code

00301J
Inventory Management Strategies
CRICOS Provider Code
00301J
Module 2-Inventory
Strategies
Inventory - and where it is held is of
common interest to all supply chain
players and must be jointly investigated
and examined.
Interesting reading:
htt:!!"""#s$digest#$om!assets!res!
e%e$&'rie(&net"or)&inventories#d(
CRICOS Provider Code
00301J
*he role o( Inventory

Inventory e%ists 'e$ause o( the +niteness o(

the rodu$tion and transortation rates

,-ittle.s -a": I/*01*2

Sour$ing: 3etermine the set o( suliers !

su'$ontra$tors to 'e used4 and develo the
$ontra$ts that "ill govern the relationshi#
CRICOS Provider Code
00301J
Inventory Strategy
1# 3e$ide inventory storage and
ro$essing lo$ation
2# Sele$t an inventory management
system
3# Set u sulier agreements
5# Set u reorder oints ,and later4
6O72
8# Set u monitoring dash'oard
9# 6sta'lish inventory disosal
ro$esses
:# Create inventory oli$ies and
ro$edures
CRICOS Provider Code
00301J
;usiness Challenges

3emand <olatility

In most mar)ets4 availa'ility trums ri$e (or

$omara'le items

Suly Chain 3isrution *as)s

=ith glo'alisation and outsour$ing4 suly $hains are

more distri'uted and $omle%: Comanies have less
visi'ility and $ontrol

JI* and -6>? redu$es inventory and other (orms o(

"aste
?et $onse@uen$e: huge suly $hain disrution ris)
CRICOS Provider Code
00301J
Strategies A Bey Considerations

Produ$t Positioning

Strategi$ imortan$e o( the rodu$t to

the $omany.s revenue and margin
o'Ce$tives

*he more imortant4 the higher the >;C

$ategory

Cometitive osition o( the rodu$tD

6g lots o( $ometition lo"er margin

lo"er $arrying $osts
CRICOS Provider Code
00301J
Strategies A Bey Considerations

Produ$t -i(e Cy$le

Prototye: o'soles$en$e ris) high due to ongoing

design $hanges A avoid inventory 'uEers

-aun$h F Ram: ea) volatility demand4 ensure

inventory ositions are aroriate to ensure
rodu$t availa'ility

Steady State or maturity: moderate inventories

'ased on strategi$ imortan$e and mar)et
ositions

3e$line to Phase-Out: signi+$antly redu$e or

eliminate 'uEers
CRICOS Provider Code
00301J
Strategies A Bey Considerations

0o" should demand variation 'e

a$$ounted (or in inventory de$isionsD

0o" @ui$)ly $an a $hange in suly

outut 'e a$$omlished and maintained

*he desired +ll rate or servi$e level

6%e$ted delivery lead time A hels to

esta'lish "here and "hen the 'uEer
must 'e maintained
CRICOS Provider Code
00301J
Strategies A Bey Considerations

<olatile 3emand

Past statisti$s o( little use

3ire$t $olla'oration "ith )ey $ustomers

,hels )ee good"ill as "ell2
CRICOS Provider Code
00301J
Strategies A Bey Considerations

0o" mu$h 'uEer inventory is needed

to address suly disrution ris)sD

=hat everyday events $an disrut

sulyD ,-ate deliveries4 $omonent
@uality issues4 e@uiment 'rea)do"ns4
Goods4 +res4 'an)rut$y4 natural
disasters2

Sa(ety sto$)s and dual sour$ing

CRICOS Provider Code
00301J
-6>? and JI*

Redu$ed lead times / redu$ed

inventory needs and in$reased
Ge%i'ility

3oes not / Hno inventoryI strategy

=at$h 3ell video

CRICOS Provider Code
00301J
6valuating Inventory Strategy Cost and 6Ee$tiveness

=hat haens i( my +ll rate o'Ce$tive

re@uires an inventory level that
$auses an una$$eta'le ima$t on
$ost and $ashGo"D

Re@uires suly $hain visi'ility4

modelling and simulation

Monitor (or shi(ts in demand and suly

CRICOS Provider Code
00301J
*o Summarise

*oo mu$h inventory "ill ima$t on $ost4 margin and

$ashGo"
Poorly ositioned inventory ,too long lead times4 slo"
(ul+lment2 "ill ima$t on $ost and $ashGo"
*he goal is to ma%imise your oortunities "ith as little
inventory as ossi'le#

*his re@uires a $lear understanding o(:

Produ$t ositioning
Pro'a'le degrees o( demand volatility
>roriate $onsiderations (or suly disrution ris)s

=hen strategies have 'een sele$ted4 they should 'e

tested and monitored using suly $hain visi'ility and
simulation tools that $an rovide a realisti$ assessment
o( their $ost and eEe$tiveness