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Reports are indicating that companies are beginning to grow their inventories, contrary to the massive reductions that occurred at the start of the recession. However, most of these companies are doing so without the necessary intelligence about where to invest and how much. This is one of many benefits found through an inventory optimization solution.

In a recent article written by Marisa Brown, Knowledge Center Director at APQC, she methodically explains the key components of a well-defined inventory optimization strategy and how to achieve the requirements of high service levels while avoiding the excessively high carrying costs of inventory.

As defined by Ms. Brown, the key components of an effective strategy include:

• Senior management support
• Periodic evaluation
• Managing service levels
• Partnering with suppliers
• Implementing inventory processes and procedures, and
• Enabling technology for optimization
• Measurement and continuous improvement

Implementing an effective strategy for inventory optimization can drive benefits beyond reducing inventory and achieving targeted service levels. It also provides for improved planner productivity, faster cash-to-cash cycles, and generating intelligence about what is driving inventory performance.

What is your strategy for implementing inventory optimization for your organization?

Read the full article from Supply Chain Management Review.

Contact TCLogic to discuss inventory optimization.

Since 1997, we have witnessed dramatic improvements in the way companies achieve targeted service levels at a lower cost, and improve decision-making by leveraging inventory intelligence. Imagine the opportunities available if your organization gained the following results:

• Reducing inventory at Verizon Logistics by $40 million while maintaining a 98.5% service level.
• Identifying 26% savings at WW Williams and greatly reducing transfer expenses.
• Decreasing safety stock by 25% in half the projected timeframe while achieving critically high service level requirements at Juno Lighting Group.
• Redeploying surplus inventory throughout a 26 branch network which reduces the overall inventory investment for Northeastern Supply while achieving best-in-class service levels.

For the companies we partner with, these results are not anomalies. In fact, a reduction of 10-30% of inventory is fairly common. More examples of the benefits of inventory optimization can be found in a recent article published in Supply Chain Management Review. Author Sean Willems discusses the benefits of these solutions, and how easily they can integrate in to any environment.

What benefits do you think your organization could gain from inventory optimization?

Read the introductory article from Supply Chain Management Review (subscription required).

Contact TCLogic to learn more about inventory optimization.

Inventory optimization is becoming more widely recognized as a strategic planning tool in many manufacturing and distribution circles. However, there remains many misconceptions about what inventory optimization is and what results can be achieved.

Recently Howard Coleman, Principal with MCA Associates, interviewed Tony Goncalves, Director of Supply Chain for Northeastern Supply, about his use of an inventory optimization solution. During their discussion, Tony describes how the benefits of inventory optimization went beyond targeted service levels and lower inventory. For example, Tony now has the ability to understand what is driving the performance of the inventory investment from data warehousing and inventory intelligence capabilities he didn't have before.

What capabilties are you looking for with inventory optimization that you do not have today?

Read the full interview here.

Contact TCLogic about inventory optimization.

Understanding the role inventory plays in financial statements is a critical component of determining the value of an inventory optimization solution. Writing for Supply Chain Digest, editor Dan Gilmore walks through the benefits of reducing inventory, and the impact it has on the Income Statement, Cash Flows, and Working Capital.

In the article, Dan uses an example of a theoretical inventory balance of $1 billion, and what effect a 10% reduction of inventory would have on the business. While Dan's example is large in scale, smaller companies with smaller investments in inventory can relate to the value of optimizing inventory levels.

In fact, our experience has shown that with an inventory optimization solution, many small and medium-sized businesses can quickly reduce inventory by 10-15% and reductions of even 30% are also possible. The first step with reducing inventory is to understand what is driving the performance of this strategic asset. Using this information, we then generate effective stocking strategies to achieve targeted levels of service at the lowest cost.

Want to learn how much cash can be squeezed out of your inventory?

Contact TCLogic to learn more.

Read the full article.

Supply chain executives have a keen understanding that effective inventory management is at the heart of business results. Yet, what has been elusive to these same executives are how to execute strategies that optimally balance supply with demand. According to a recent study by CSCO Insights, they are recommending 5 key strategies to align the inventory investment with business objectives.

As part of CSCO's study, is a survey about current perceptions of the effectiveness of the respondent's supply chain. Listed below are some of the findings:

• 76% ranked supply chain management as a top or highly important priority
• 70% rated themselves as just average or worse in regards to process maturity for managing inventory
• 70% rated themselves as average or worse for technology enablement
• 79% felt that a potential inventory reduction existed of 5 days or more for DOH inventory.

The data from this survey supports CSCO's belief that "an increase in supply chain complexity is making it difficult to effectively manage inventories."

While no one technology or strategy can solve or mitigate the complexities faced by today's supply chain executive, there are 5 recommendations that CSCO supports in this study. The five recommendations are as follows:

1. Get more granular with safety stock management
2. Add inventory planning to the S&OP process
3. Make regular use of supply chain network optimization tools for tactical planning
4. Consider distributed order management tools to manage multi-channel complexity and reduce inventories
5. Step up to inventory optimization software.

As stated by CSCO Insights, "probably the most aggressive step a company can take is to adopt a relatively new category of software solution called inventory optimization, or IO."

CSCO adds that most companies have tried to improve inventory planning and management by improving forecasting. This approach has run it's course as these companies have taken this approach as far as they can go. They (CSCO) recommend new tools and technologies to take improvement efforts to the next round.

Read the full study from CSCO.

Contact TCLogic about inventory optimization.

Among concerns faced by supply chain executives around the world, chief among them are fluctuating customer demand and variances in customer requirements. Adding to these challenges is the need for protecting margin and reducing working capital, as identified by a recently released report from IBM titled, "New Rules for a New Decade."

With consistent pressure for supply chain managers to create value, end-to-end supply chain cost and pipeline inventory optimization are predominant challenges. To overcome complexity and uncertainty, the report continues with three new rules of managing the supply chain:

1. Smoth volatility with predictive demand.
2. Collaborate with visibility to events, with suppliers, service providers and customers in an open, action-oriented environment.
3. Enhance value with dynamic inventory optimization. Optimize pipeline inventory, the global supply chain network and cost structures.

As noted in the report, "as enterprises seek to optimize their supply chains and respond to constant demand variance, adopting new rules to restore stability to supply chain operations is critical."

How prepared is your supply chain for the next decade?

Contact TCLogic to learn more.

Read the full article from Supply Chain Management Review.

Responding to the economic crisis, many organizations quickly reduced inventories in order to mirror new demand realities. However, as signs increasingly point to a recovery, these same companies are realizing that perhaps their inventory levels are too lean.

In a survey published last month by Morgan Stanley, they found that 42 percent of the 500 respondents expect their ordering activity to pick up in 2011. According to Morgan Stanley, these findings suggest that the restocking activity of 2010, which played a role in last year's recovery, still has some life left in it.

As the process of restocking inventory continues, it is critical to restock to strategic levels. During the course of reducing inventory, many companies found themselves with higher percentages of slow-moving and/or dead inventory. To prevent further growth of this under-performing asset, it is imperative to create stocking strategies that improve the overall performance of the inventory investment.

Creating stocking strategies that achieve best-in-class services levels at the lowest cost of inventory can be accomplished with an inventory optimization solution. Utilizing data already residing in your ERP, these solutions offer a rapid implementation timeframe and can provide an ROI within 6-12 months.

Companies can no longer afford to base stocking decisions on simple planning strategies developed twenty years ago. These outdated methods often inflate safety stocks, lower turn rates, and achieve less-than optimal service levels.

What method does your company employ to determine stocking levels? Is there an effort underway to investigate advanced methods?

Contact TCLogic to learn more.

Read the full article from DC Velocity.

Developing stocking strategies for slow-moving inventory is an important aspect of improving overall inventory performance.  In order to create effective strategies for slow-moving inventory, it is important to first define what is considered slow-moving and then understand the impact that segment has on business results. 

We often find that slow-moving inventory accounts for a significant percentage of an organization's total number of SKUs, but represents small portion of revenue.  As a result, buyers and planners focus their efforts on fast-moving inventory because it represents the "bread and butter" of an organization.  Slow-moving Inventory does not receive the attention required to improve the performance of this strategic asset.

A recently published article from SCDigest illustrates the importance of managing slow moving inventory.  Using data from a manufacturer, McKinsey Quarterly segmented the inventory by demand volatility and volume, and then determined the profit contribution of each segment.  They discovered that low-volume inventory represented about 90% of SKU's and contributed a significant 35% to total profit.  From this analysis, the sample company was able to construct segmented supply chain strategies to maximize profitability.  We would have liked to see the impact of service level from this investment as part of the analysis.

Determining meaningful inventory segments and understanding the impact of slow-moving inventory are important processes when planning inventory. Organizations can gain insight into their inventory performance with an inventory optimization solution. These solutions use sophisticated algorithms to achieve targeted levels of service at the least cost of inventory. They generate effective stocking strategies for slow-moving inventory that not only contribute to profitability, but also fill a critical service level gap.

Is your company searching for an effective process for managing slow-moving inventory? How much could your business results improve if slow-moving inventory were effectively planned?

Contact TCLogic to discuss slow-moving inventory.

Read the full article from SCDigest.

Results from the latest survey from eyefortransport, The Global Supply Chain Office Strategy Report for 2011, reveals the top challenges and projects for supply chain executives in the coming year. Asking about potential challenges for 2011, the top 5 are:

1. Demand Variability (42%)
2. Cost Containment and Reduction (39%)
3. Supply Chain Visibility (35%)
4. Inventory Management (33%)
5. Escalating Customer Expectations (33%)

Half of the respondents reported that they have are implementing or plan to implement solutions to address these challenges. According to the survey results, among the top projects are:

1. Cost reduction/containment
2. Inventory optimization
3. Supply chain visibility
4. Aligning the supply chain with business objectives
5. Long-term forecasting and demand planning

The results of this survey are in line with what our customers have been discovering. Our customers learn that with an inventory optimization solution, they can effectively align their investment in inventory with business objectives, reduce working capital requirements by reducing inventory, and achieve targeted levels of service at the lowest cost of inventory.

Is an inventory optimization solution in your plans for this year? Find out more from TCLogic.

Read the full article here.

Learn more about inventory optimization from TCLogic.

Best in class companies are 5 times more likely to utilize a multi-echelon inventory optimization solution than laggard companies. - Aberdeen Group

It should be no secret that best-in-class companies apply effective inventory management practices to achieve best-in-class results. But what Aberdeen Group has accomplished in a recent brief is to quantify how many companies are applying these practices.

The brief published in December recommends inventory optimization strategies for the Chief Supply Chain Officer and why inventory optimization is a high priority initiative. While many medium to small-sized companies do not have a CSCO, our experience has shown that the strategies suggested by Aberdeen are applicable regardless of the size of the company, or the industry they serve.

The strategies they recommend include the following:

• Segment finished goods inventory based on financial performance. 47% of best-in-class companies indicate strong capabilities in segmenting their inventory beyond simplistic ABC methods.
• Move away from "rule of thumb" inventory target settings. 63% of best-in-class companies indicate strong capabilities with analyzing demand patterns and SKU-level forecasts.
• Extend inventory optimization beyond finished goods inventory management. 47% of best-in-class companies have the ability to perform inventory optimization.

Want to learn how inventory optimization can improve your results?

Read the full brief from Aberdeen Group.

Learn more about inventory optimization from TCLogic.

Every industry involved with holding inventory runs the risk of building slow-moving and obsolete inventory. Some organizations have created positions with specific responsibilities for managing this under performing asset.

In a recent posting by SupplyChainBrain, consultant Lora Cecere offers three action points to address this universal challenge. The three actions she suggests are:

1. Some excess and slow-moving inventory develops from new product launches. There must be a process in place through S&OP to react quickly to rates of demand change during the new product launch.
2. Disposition processes must be defined and executed in order to move the slow-moving product through the supply chain. The quicker it moves out, the less of a drain on working capital.
3. Understand the form and function of inventory in order to set appropriate stocking levels where and when you need it.

These actions require the use of advanced analytics that can be found in inventory optimization solutions. Our customers can pinpoint excess and slow-moving inventory, and suggest stocking strategies to reduce inventory while achieving targeted service levels.

How effectively are you addressing excess and slow-moving inventory?

Read the full SupplyChainBrain article.

Learn more about inventory optimization from TCLogic.

Best-in-class companies often find themselves under the microscope of their peers because their peers want to mirror what they do in order to achieve improved business results. The popularity of specific business practices and ideas from best-in-class companies can say a great deal about where other organizations see the greatest room for improvement. For example, the most popular idea during the past year is incorporating advanced analytics into standard inventory planning practices. Other popular topics include managing excess and obsolete inventory, and another about unlocking working capital through effective inventory management.

During 2010, the state of the economy drove many executives responsible for inventory performance to eagerly search for ways to improve results. Based on our experience, executives are investigating tools like inventory optimization to leverage inventory intelligence, realign inventory levels, decrease excess, achieve service level targets, and generate cash from working capital.

Listed below are the top three ideas from best-in-class companies during 2010:

A recent article in Supply & Demand Chain Executive highlighted some of the common pitfalls that occur when implementing and using an inventory optimization solution. Author Mike Valentine detailed three of these pitfalls, and they include:

• Upfront investment, often greater if performed in-house
• Gap in skills, with either inventory planners or IT personnel
• Employee turnover and succession planning

While the above pitfalls can be easily addressed by using an effective outsourced vendor, there are three more pressing pitfalls that must be addressed before even engaging a vendor of inventory optimization solutions. They include:

• Inventory accuracy - a solution will be unable to tell you where you need to be with your inventory investment if you don't know where you are.
• Clean data - the old adage of "garbage in is garbage out" is an integral part of any analytical solution, especially inventory optimization.
• Executive commitment - a management team that is not committed to achieving targeted service levels with less inventory will negatively impact the process and the results.

Is your organization prepared for an inventory optimization project? Be certain you are not only aware of the pitfalls, but have contingency plans in place prior to adopting an advanced inventory optimization solution.

Read the full article from Supply & Demand Chain Executive

Contact TCLogic to discuss inventory optimization.

The benefits of inventory optimization can be substantial for the right organization in terms of reducing inventory and achieving targeted service levels. According to Lora Cecere, industry expert for Altimeter Group, there are some challenges to overcome in order to effectively implement such a solution. In an interview hosted by TechTarget, Ms. Cesere described the two major challenges as:

• Inventory planning expertise - it's critical to have the analytical skillset
• Management focus on working capital

Ms. Cesere continues by stating that there remains great opportunity for many organizations to leverage the use of an inventory optimization solution since only about 35% of qualified manufacturers and distributors are utilizing this tool.

Are you searching for an inventory optimization solution?

Read the full interview at TechTarget.

Contact TCLogic about inventory optimization.

Analytics has become an integral part of the decision-making process in many organizations. For companies managing inventory, the use of analytics is a necessary component of the planning process and can be leveraged to improve business results.

Evidenced by a recent survey conducted by Accenture, they found that high-performance manufacturing companies are five times more likely to be using advanced analytics than their underperforming peers. But as attractive as analytics is, there are challenges to implementing advanced solutions in the operations environment. In a recent article published by IndustryWeek, author James Robbins, provided insight into these challenges and they include:

• Focusing on the wrong metric, or too many of them
• Having too much data
• Managing transition from intuition to fact-based analysis
• Cleaning up bad data
• Selecting the right people with the right skillset

As the interest of advanced analytics grows, so to does the tools of technology that support the decision-making process. Especially for advanced inventory planning capabilities, one of the best tools in the market today is an inventory optimization solution. Not only do these solutions provide inventory intelligence to support smarter decisions about the inventory investment, but they generate stocking strategies to achieve targeted service levels at the lowest cost of inventory.

Read the full article from IndustryWeek.

Ask a question about inventory optimization.

During the past two years, many supply chain innovators have been reluctant to enhance the tools of technology they use in order to achieve best-in-class business results. For many executives the reason may be an aversion to risk in a volatile economic environment, or for others there is a lack of cash available to invest in innovative solutions despite the proven return on investment.

Published by Aberdeen Group in October 2008, is a research brief that lays out the technology footprint for supply chain innovators achieving best-in-class inventory performance. The requirement of 82% of respondents in this study was to increase customer service level without inreasing the inventory investment. According to this study, "inventory optimization continues to be the area companies are most focused on today in terms of inventory improvement priorities."

While this research brief was published in 2008, I doubt that much has changed in terms of what is required of today's supply chain - increase service levels without increasing the investment in inventory.

Are you an innovator with a focus on inventory optimization?

Read the full research brief.

Contact TCLogic about inventory optimization.

Dan Gilmore, Editor of Supply Chain Digest (www.scdigest.com), wrote an article last month that provided a look forward for those companies looking to innovate their supply chains in order to advance their businesses ahead of their peers.

It almost goes without saying that many of the suggestions provided by Dan Gilmore have been mentioned before in nearly every supply chain related periodical. However, it never surprised me how many organizations that have a sizable inventory investment are not executing the strategies listed by Mr. Gilmore.

His strategic actions are:

• Revisit or build supply chain strategy. Or as Mr. Gilmore defines it, aligning the supply chain with the business strategy.
• Re-look at the network design - frequently. Combining DC's, opening new ones, etc. Average companies do this once every 2-3 years. Best-in-class do it every quarter.
• Re-look at your software portfolio. What do you use, what don't you use, what could you use 2-3 years down the road? What can be the impact of going to an SaaS model?

His tactical actions are:

• Re-think your trading partner collaboration.
• Take control of inbound freight.
• Reduce SKU counts - rationalize the SKU population.
• Take a look at inventory optimization software. The advantage is bring able to consider the need for inventory holistically, not a node or level at a time. If my new company didn't have it, I would assess what it might do for us and move forward accordingly.

Has your organization examined an innovative solution like inventory optimization before?

Read the full post at SCDigest.com.

Contact TCLogic about inventory optimization.

During this great recession, many organizations were more than eager to reduce inventory levels in order to gain a foothold on the new normal of reduced demand in the marketplace. However the tide is beginning to turn with the advent of more commentary about what to do when demand does begin to return. At least that is the position of a recent article written by Patrick Brunson, Executive Editor of "Supply Chain Management Review." In the article, Mr. Brunson examines the impact that increased demand will have in a marketplace with less inventory available to serve.

According to two educators noted in the article, companies that suffered a supply chain disruption encountered between a 33 and 40 percent reduction in stock price, compared to industry peers over a three year period. It's not surprising that a large portion of those companies fail to adequately recover from a supply chain disruption.

One way to reduce the risk associated with increased demand, or disruptions in supply, is to understand and model the impact each would have on the business. Modeling changes in a network can be handled with an effective inventory optimization tool. Many organizations utilizing these tools achieve business results such as reduced inventory, best-in-class service levels, and the necessary inventory intelligence to make smarter decisions about when and where to invest in inventory.

Read the full article from SCMR.

Contact TCLogic about inventory optimization.

Analytics in the supply chain environment is increasingly finding its way into conferences, articles, discussion groups and webinars. But why? Writing for Supply Chain Management Review, editorial director Frank Quinn attempts to answer this question in a recently published article.

Analytics is the process of collecting, storing, and analyzing vast amounts of data in order to support the decision-making process. Certainly in the area of inventory, the volumes of data that reflect the activity of transactions, trends, patterns, and other insight, support the need to understand what is driving the performance of this valuable asset and is often beyond the capabilities of Excel spreadsheets and ERP's.

Mr. Quinn writes, "Powerful technology solutions lie behind advanced analytics applications." Without question, inventory optimization qualifies as one of these solutions. With this effective tool, stocking strategies can be developed, tested, and verified prior to executing a purchase order. Inventory planners can now support their decisions with access to inventory intelligence they didn't have before, and can operate on the same page as an executive.

The bottom line results prove the effectiveness of advanced analytics with many companies reducing their inventory by as much as 30% while achieving critically high service levels. It's no wonder why so many companies are investigating solutions like inventory optimization. As Mr. Quinn states, "Companies have maxed out on the cost cutting activities. Now they are thinking about positioning themselves for the growth ahead. So how to make the right decision in this regard? Supply chain analytics is a big part of the answer."

Would supply chain analytics help your business advance?

To read the full article, select here.

To contact TCLogic, select here.

Excess and obsolete inventory is costing businesses hundreds of millions of dollars in terms of time, opportunity cost, and lost value. For those companies managing large inventory investments, it clearly makes sense to appoint an individual or a team of experts with responsibility of identification and disposition of this under-performing asset.

Writing for DC Velocity, author Herb Shields supports this strategy, "Organizations need to dedicate resources that can take ownership of E&O and not just report the problem of the data." Since excess and obsolete inventory naturally impacts the bottom line, it is vital to the success of this effort to create a sustainable process to prevent E&O in the first place.

Working with one of our customers, they had  two clear objectives from the implementation of our inventory optimization solution:

• Dramatically reduce the excess inventory in their network, and
• Maintain their reputation for high service levels.

Within 12 months, they not only achieved a reduction of surplus inventory by realigning their branch inventory levels, but also achieved reductions of faster-moving product as well. The success of this project involved having an individual with direct responsibility for surplus, and having the right tool in their IT environment to generate the necessary intelligence to support strategic decisions.

Having a defined process and an effective tool for creating and maintaining stocking strategies is essential for providing a sustainable environment to prevent E&O inventory from negatively impacting the bottom line.

How much pain do you feel with excess & obsolete inventory?

To read the full article, select here.

To contact TCLogic, select here.