Inventory Turnover Breakthrough … Go Back To The Basics!

Inventory Turnover

I had accepted a career changing challenge … how to change the company’s Inventory Turnover performance from being perennially worst in the Industry to being one of the best.  And I had to do it all within 1 year!

I had seen many very smart people tackle this problem over the years.  Yet they all seemed to come up short.  Sure they improved some aspect of Inventory levels or turnover but in aggregate these all seemed to amount to incremental, step function changes.  We needed game changing results!  We needed a game changing approach!  And we needed it now!

I spent a fair amount of time thinking about how to tackle this.  I had responsibility for Inventory Management about 15 years before and achieved great results at the time.  But the company was smaller then and more geographically centralized, we had one main customer, and the supply chain was much simpler.

A Complicated Problem

Now we were a global company with dozens of customers, dozens of facilities, thousands of employees, and tens of thousands of parts and bills of material.  We had a myriad of different processes, different internal cultures, and competing internal objectives.  We also had unclear ownership of the problem, and a lack of unambiguous leadership and accountability.  In short, it was a highly complex environment.

As I considered how my predecessors had tackled the problem of improving Inventory Management, it became clear to me that they generally tackled one aspect of inventory at a time, and they did it serially.

Someone would focus on lead time improvement or parameter management for 6-12 months.  Once they felt they had a handle on that area they then moved on to another area, such as Excess and Obsolete Inventory.  But they would do this only AFTER they had worked on lead times and parameters for 6-12 months.

Further, within any of these projects they would typically work on pilots.  They would try out their ideas on a subset of the customers, products, facilities, suppliers or parts that we dealt with.  Once they had this experimentation under their belt they would consider a larger rollout of their concepts.

While I don’t doubt this delivered results, it also resulted in a very long process.  I’m sure it also fixed issues on a smaller scale before they became larger, but it was highly risk averse.  I had no time for such a protracted approach.

Inventory Basics

Additionally, any of the work done previously on Inventory Turnover improvement didn’t seem to have any long lasting impact.  The results achieved were not only limited in focus but they were not sustainable.  

Their process changes, behavioural changes, and processes of governance and measurement were not strong enough to ensure long lasting results.  We would need an approach that made improvements now and for years to come.

A Holistic Approach

With all of that considered I decided that I needed to take a very holistic approach.  Instead of looking at one aspect of Inventory Turnover Management at a time I would take a very holistic approach.

I needed to manage all of the levers that control the rate at which we brought inventory in to the company, all of the levers that control the rate at which inventory moved within the company, and all of the levers that control the rate at which we moved inventory out of the company.  And I needed to manage all of that concurrently, in parallel, not in a serial mode.

Further I needed to manage this as an all out blitz.  I did not have the time to try pilots and to experiment.  I did not have the time to install complex IT systems and solutions.  And I needed to launch a grass roots Global imperative to drive cultural change and achieve Game Changing results as one major event.  Sure there were risks.  But the greater risk was to do nothing at all or to do something so slow that it hurt the company.

And I also needed to manage this with a tight process of governance, measurement, and accountability.  Everyone needed to understand their targets, the path to get there, and their responsibility to get things done.  This would allow us to deliver sustainable results.

I had the Call To Action!  I knew how I wanted to tackle the Inventory Turnover challenge.  Now I had to crystallize the approach!

Originally published January 13, 2017.