Demand-Driven Inventory Optimization and Replenishment

Chapter 6Shifting the Focus from an Algorithm Discussion to a Business Discussion

As discussed earlier, the math behind inventory optimization had its start in Operations Research and came to fruition in the late 1990s and early 2000s. Professors at various universities, both domestic and international, developed processes that would enable the calming of the bullwhip effect and assign inventories in the best possible positions for the highest service levels at the lowest costs. At first, this PhD “mumbo-jumbo” was viewed as cutting-edge functionality and the realm of the innovator-adapters in various industries. Every new technology idea has the infamous hype cycle.

All business technologies go through an adoption process that has five phases. The length of the adoption rate corresponds to a secondary process called the hype cycle. The hype cycle represents developers of the technology pushing or hyping itself. In Figure 6.1 you can see how the typical adoption process goes through innovation and early adopter phases. During the early adopter phase the hype outpaces the adoption. In essence, the technology almost becomes too good to be true. It is during this period that a technology can solve all business problems during the day and have enough time to fix dinner and put the kids to bed! Most technologies hit what is known as the chasm at this point and, if they are lucky, go through a trough of disillusionment. Many technologies don't and stall out before there is a major ...