Attacking just a single element of inventory has, in our experience and observation, proven to be an insufficient approach to making significant, sustainable changes. The entire ecosystem of processes, variables, and stakeholders requires taking a holistic approach enlisting a variety of tools and techniques (eg. lean inventory management) to drive game changing inventory performance.
Given the breadth, depth and complexity of the Inventory Turnover management ecosystem it is not surprising that there is much to be addressed in this area. We’ve captured much of this in our article Featuring our Top 10 Inventory Management articles.
In this blog article we’ve captured much of this content in a single Infographic
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!
Taking a holistic approach in order to achieve Inventory TurnoverBreakthrough results meant that I needed to consider the End To End Supply Chain. As I thought through this approach there was really no other way if we were to achieve significant improvements to help the entire business in a short period of time.
In thinking about the End To End Supply Chain it was necessary to define all of the aspects that impact Inventory levels. In short I needed to be able to manage:
All of the levers that control the rate at which Inventory is brought in to the company
All of the levers that control the rate at which Inventory moves through the company
And all of the levers that control the rate at which Inventory moves out of the company
In my experience when you embark on driving any kind of Game Changing Transformation you will most likely also need to break barriers and change behaviours if not the Culture. As the saying goes, “the definition of insanity is doing the same thing and expecting different results”. So in order to get different results you may have to break through barriers and drive different behaviours from what are inherent in the current Culture.
Your organization is an ecosystem of policies, practices, processes and procedures that are the result of decisions, beliefs and behaviours. Over time much of this generally gets accepted as the way it’s always been done and is not open to challenge or to change. Therein sacred cows, whether real or perceived, can become obstacles to making the changes needed to derive different results from the status quo.
Having your Call to Action in Place, A Project Name and mandate, and a Holistic Approach are critical. But the “X” factor that you also need to have a strategy for is Cultural Change.
We launched the Global Inventory Turnover Breakthrough project on April 1st. It was not a joke. Our challenge was to improve Inventory turnover from 6.3 turns to over 8.6 turns within the year. This was a level of achievement that the company had never before reached, let alone thinking about going from Worst to First.
But we had the Call to Action. Our Inventory turnover was perennially the worst in our industry. Our Inventory levels were consuming an enormous amount of cash as well as creating a lot of expense in carrying charges. And this had the effect of driving our Return on Invested Capital to very low, unattractive levels. Further there were ongoing complaints that even though we had a lot of inventory we never had all of the right material that was needed.
We had the motivation to turn this situation around. What we didn’t know is that we were about to make history and go from Worst to First!
Many projects often fade away over time and fall well short of their original goals. People face many very real challenges in leading these projects. So how do you avoid having your project become another program-of-the-month and disappear from view? Is there a formula?
Your challenge may be trying to improve Inventory performance or trying to create a transformational improvement in some other area. We have found that there is a formula and a set of key principles that are critical to driving the game changing results you are looking for.
Have you experienced part shortages that gate your production schedule?
Part shortages can be highly frustrating issues to deal with. They almost always happen within the standard lead time of the components you need. And very often they can stop production immediately.
Everyone wants the shortage resolved immediately. From your Customer to your CEO through to the entire Management chain and everyone in Production … they all want the needed parts NOW!
But there are many reasons why part shortages occur. And there are many actions that can be taken to mitigate their occurrence. You don’t have to live with shortages every day if you have a Supply Line strategy.
“We are a Supply Chain Services Company,” I was told.
“If we are truly a Supply Chain Services Company, then why is our Inventory Turnover only at 7?”, I asked.
I had just joined the company and in studying their financial performance it stood out to me that if we were truly a Supply Chain Services company then having only 7 Inventory turns was extremely uninspiring.
We needed to be dramatically better at managing Inventory to convince ourselves, and our customers, that we were a trusted and leading Supply Chain Services partner. Could we double inventory turnover?