Demand-Driven Inventory Optimization and Replenishment

Chapter 12Inventory Optimization in Supply Chain Verticals

Out-of-stocks in the distribution chain are usually thought of in three ways.¹ The first is shelf—“last 100-foot problem.” The stock is in the store, but due to the lack of foresight, the product has not been restocked and an empty shelf is in play. The second is store. The store has mis-ordered and stock is not in the store. The third is distribution. There is a lack of stock in the distribution system. The first is a distinct problem of retail execution. The latter two are attributable to a combination of oversight and a lack of acceptance of demand and supply variance. The latter two are completely solvable.

Several years ago, I was at a supply chain conference, listening to various industry experts talk about the problems they were having with regard to inefficiencies. It made me kind of smile because you could have taken each of the expert's points and just changed the date of a supply chain conference to 5 years, 10 years, or even 20 years prior! Each of them were talking about the grave situation with out-of-stocks, fill rates, inefficient forecasts, lack of collaboration, and on and on. All you had to do was update the buzzwords to make sure you were in 2014 instead of 1994. Supply chains are so much like forecasts. You know they're going to be wrong! You just had to make sure they are less wrong and plan for the inefficiencies in such a way that you reap the advantage you have over your competition in the space. ...