Demand-Driven Inventory Optimization and Replenishment: Creating a More Efficient Supply Chain

CHAPTER 6

Fitting Unlimited Optimization into a Constraining World

Positioning inventory correctly can save a lot of time and effort when it comes to making sure replenishment practices are in synch. So far we have examined how inventory optimization methodologies can dramatically improve the performance of enterprise resource planning (ERP) and transactional systems by correctly positioning the right inventory at the right place to satisfy customer demand. Indeed, the inventory optimization process turns days of supply on its head to create individualized inventory policies that overcome the inefficiencies of rule-of-thumb assignments. However, have you ever noticed when you walk into a buyer's office that the first thing you see on the desk is a very big report? Almost without exception it will be a report generated with Excel. It will be collated and either paper clipped or stapled with the biggest fastener available. If you are in the office of a busy buyer, you will see multiple reports strewn all over the office.

THE PRESENT STATE OF AFFAIRS IN REPLENISHMENT PLANNING

During one of my visits to a national grocery warehousing company, I had the chance to interview various buyers in an effort to see how they were dealing with a recent installation of a competitor's inventory optimization system. The installation was a single-echelon environment (individual warehouses in various locations that were not linked) and had taken just a little over six months and had been up and running ...