SCM Strategy: Do not lose sales due to inventory issues

I have written earlier about inventory optimization and its key drivers and thanks to my readers, the article made it to the best inventory optimization articles and was appreciated by Chief Supply Chain Officers across the globe. It also triggered a debate on how should we first identify the exact causes of lost sales due to inventory related issues and deploy pertinent solutions. Normally, lost sales due to inventory drives the business teams to push for increase in inventory levels and if the supply chain team resists, the sales team will start adding buffers to the safety stocks of at least the best selling items and hence the inventory levels will rise automatically over time. These measures  however, are less scientific and panic driven which increase the working capital and inventory carrying costs. It also reduces the inventory turns and leads the best in class organization towards the laggards position, though the service levels might increase.

This whole situation compelled me to take the article to the next level and come out with the possible reasons, causes, solutions and enablers on the subject of losing sales due to inventory issues. I could create a small framework that talks mainly just about the key reasons etc. and do not cover everything related to it. Infact, this framework (which is given below) is industry agnostic and can be the starting point of inventory optimization for most organizations. It also incorporates the best practices that major supply chain leader companies (like Apple's iPAD SCM policy) deploy and is worth a look and evaluation.


In case the above picture is not visible or you need further details on how to use the framework to identify the reasons, causes, solutions and enablers for your own organizations, please contact me through the contact form. I share the knowledge completely free of cost.

2 comments:

  1. Puneesh,

    This is a very nicely written articale with good information. You have mentioned CPFR in the enablers. Can you explain what it is?

    Thanks,
    Punit

    ReplyDelete
  2. Thanks Punit for the feedback.

    CPFR means collaborative planning, forecasting and replenishment which helps you to integrate all three important ingredients of inventory optimization and helps to address demand volatility with minimum possible inventory.

    ReplyDelete

Your thoughts are welcome