The Importance of Inventory Management in Supply Chains

The Importance of Inventory Management in Supply Chains

inventory management

The management of inventory is necessary for any company so that excess stock is not stored at the company while simultaneously ensuring demand for customers is met.  Trying to balance the demands of customers can be difficult to forecast resulting in inaccuracies caused by evolving trends, variability in customer preferences and the need to maintain sufficient supply of materials and goods to buffer variability.  The optimal balance however, is often achieved through properly planned and managed inventory.

To help reach this balance, many businesses implement a sales and operations (S&OP) process.  The basic purpose of S&OP is to bring the demand management functions of a company, for example, sales forecasting and marketing, together with the operations functions of a company like manufacturing, supply chain, logistics and procurement to level the tactical and strategic plans.  This process regularly includes extensive modeling and discussions about the company’s on-hand, in-transit, and work-in-process inventory.  These discussions allow the sales and marketing teams to effectively plan for the period, by obtaining a realistic picture of the inventory levels available for sale or to better understand the projected future Available to Promise (ATP).  Also, the operations teams are updated with direct sales forecasting information, which can contribute to planning for near-term and future inventory and manufacturing needs.  This information can drive a shift in manufacturing plans or changes in procurement needs because of a S&OP decision to focus on specific products, thereby driving the need for additional inventory.

Another way to achieve the balance is through point-of-sale (POS) data for inventory management in the retail industry.  Every time a barcode is scanned during checkout it captures data.  The information is not only tracked by the retailer but is often distributed to upstream vendors.  As items are removed from inventory, in some cases, both the retailer and vendor collaborate together to determine when reordering is needed.  Demand information is tracked to determine when the best time to place replenishment orders based on the lead time required and variability present when moving the inventory to a downstream location.  At its core, inventory decision making is used to effectively time when discrete quantiles of supply inflows are needed to handle demand outflows.

If you are looking for ways to improve your inventory performance, the TransVoyant Inventory Insight monitors the behavior of on hand inventory at your nodes, and your trading partner nodes, including raw materials, work-in-process, finished goods as well as in-transit inventory planned to flow in and out of nodes.  The insight also compares current and future inventory to planned inventory at each location based on inventory policies and predicted inventory flows and levels. TransVoyant can integrate and predict enterprise performance from the point of sale back through your supplier ecosystem, giving you not only complete visibility but also the decision-making intelligence to allow you to optimize your global business flow.  Finally, the Inventory Insight gives predicted inventory levels, velocity and variability that are based on both planned and behavior driven events (e.g. precise time of arrival, live visibility, dynamic lead/cycle time, dynamic variability).  What you gain from this insight is not only visibility, but the understanding of behavior of on-hand and projected inventory across your entire network and ecosystem.  You also gain knowledge of your business exposure to inventory disruptions in a lane or in a node and the ability to identify trends between inventory and other metrics, such as service levels and supplier performance.


If this information sounds intriguing, please email to speak with one of our experts regarding your inventory management needs.

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