Winning the Inventory Battle in Consumer Electronics
Consumer electronics manufacturers optimize inventory to pull ahead
In the consumer electronics industry, it is crucial to optimize inventory because product shelf lives are short and the greatest margin occurs during a successful product launch. So it’s not surprising that consumer electronics SKUs are proliferating, as are the channels, customers and locations through which these products must be distributed. But 50% of new product introductions fail to achieve success and almost half of those failures are due to initial misreads of market expectations. Why? From a supply chain standpoint, the battle for profitability turns largely on two key disciplines: the ability to accurately plan demand and effectively optimize inventory.
The threats to success are significant in an industry where the profitable period of a product’s lifespan may be as short as three months. Forecasts must often be generated with insufficient precedents. Consumer electronics manufacturers can improve their odds during the short-lived product moment of truth with a more accurate demand planning process and effective multi-echelon inventory optimization (MEIO) strategy. Mastering these disciplines yields big benefits. Companies that do a better job forecasting demand carry 15% less inventory, have 17% stronger order fulfillment, and 35% shorter cash-to-cash cycle times. It is estimated that a 5% improvement in forecast accuracy yields a 10% improvement in perfect orders (and every 3% improvement in perfect orders increases profit margin by 1%).
The motivation is clear. Leading consumer electronics companies must continually drive their demand planning and inventory optimization expertise to new levels of effectiveness. This white paper explains why mastering these disciplines and learning how to optimize inventory yields big benefits, including carrying less inventory, improving the order fulfillment process and experiencing shorter cash-to-cash cycle times.
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