This is Not Your Father’s Inventory Optimization
If you are near to my age it is a good chance that your parents or maybe even you owned an Oldsmobile at some point. While growing up, my parents owned several Oldsmobile. The Oldsmobile was considered a reasonable priced family car with some luxury features and positioned between the Chevrolet and Buick brands of General Motors. In the mid to late 80s Oldsmobile started to see their market share drop as younger buyers wanted something different from what their parents owned. Seeing the handwriting on the wall, Oldsmobile hired an advertising agency to create a memorable but disastrous campaign based on the slogan, “This is not your father’s Oldsmobile,” to try to reach the younger car buyers.
Unfortunately the new slogan not only didn’t attract younger car buyers who weren’t fooled by a campaign slogan while seeing very little difference in new Oldsmobile models, it also alienated their existing older buyers who still wanted the old Oldsmobile. That was 1988. Oldsmobile saw accelerated market share decline over the next twelve years and closed its doors in 2000. Although the marketing slogan didn’t help, Oldsmobile’s downfall was not changing its product line fast enough to meet buyer expectations.
The first commercially available single-echelon inventory optimization solution was introduced in the 90s and the first commercially available multi-echelon inventory optimization solution was introduced in the early 2000s. These first solutions were mostly used for periodic review and optimization of inventory carrying parameters. Companies would adjust their inventory parameters on an annual or semi-annual basis. The lack of computer power limited the level of detail at which analysis could be performed and how often that analysis could be done.
Supply chain operations have seen significant change over the last 20 years caused by ever-increasing pressures to lower costs, increase speed, and provide value-added services. Luckily, during the same time period, computer processing power has experienced exponential growth enabling the development and deployment of lightning fast and feature rich software solutions.
Today’s multi-echelon inventory optimization solutions enable optimal inventory investment (raw, component, WIP and finished) across the entire supply chain by considering the impact of inventories at any given level of the network have on other upstream or downstream inventory levels. Today’s powerful Artificial Intelligence infused systems enable continual and automatic updates of inventory parameters by taking advantage of real-time supply chain and market data. Finally, as opposed to early inventory optimization solutions, today’s leading solutions take the impact of variability in demand and supply into account when making inventory level recommendations.
A significant competitive advantage can be gained by those that embrace today’s advanced inventory optimization solutions. There are many case studies available that document both improvement in customer service and huge reductions in inventory from the adoption of inventory optimization capabilities. Considering the immense pressures faced by supply chain operations today, can you afford not to gain the advantage an inventory optimization solution can provide? Truly, today’s inventory optimization solutions are not your father’s inventory optimization solutions.
Recently, a colleague recounted a new consulting job he had undertaken a few years back. The client was struggling to make a large enough profit, whic
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