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3 Top Inventory Management Challenges

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The SILO CHALLENGE

The silo mentality exists in many larger corporations, when each director is more worried about his/her department’s performance than the overall benefit to the company. This can occur whether you are delivering to a production line or a retailer’s RDC (regional distribution center). The first step is to look at the supply chain in its totality. Understandably, it can be difficult to ask a neutral observer to come in and assess your company and question deeply entrenched beliefs and future plans. But utilizing an expert third-party, with management expertise and industry know-how can be the right change agent to actually challenge long-held fiefdoms. With objectivity and a holistic approach, the UPPRO team can help you break down the silo mentality and can bring huge savings to your supply chain without compromising service quality—actually improving that quality and customer satisfaction. UPPRO builds collaborative customer teams and maintains command of actionable information with suppliers and our logistics team at UPS throughout the entire inventory lifecycle. The UPPRO approach integrates information on parts usage, procurement, and supply chain issues resulting in reduced excess inventory and freed up working capital, optimized inventory mix, minimized write downs, and decreased costs—in an ongoing process of continuous improvement.

The MANAGEMENT VS. TRANSACTION PROCESSING CHALLENGE

What is Inventory Management? Is it this…?

  • Issuing PO’s
  • Receiving parts
  • Processing documentation
  • Issuing payment
  • Updating IT receiving system
  • Issuing parts for use
  • Planning and scheduling part us

Or, is this Inventory Management?

  • Should the part be stocked or not?
  • What methodology do you use to value stock?
  • What should the re-order point be?
  • What should the re-order quantity be?
  • What approach do you use to control stock levels?
  • What process do you use to retire parts?

When addressing managing inventory, it takes a forward-facing organization to acknowledge that inventory management is not all about a short-term focus on transaction processing. Rather, the effective management of raw materials and spare parts inventory is all about collaborative planning and experienced, strategic management decision-making to keep service levels high while constantly driving out waste and reducing costs along the entire inventory life cycle.

The CULTURAL CHALLENGE

Culture is one of the most important elements contributing to successful inventory management and to true organizational maturity. It focuses on the people and the success of the organization. It requires everyone’s engagement, commitment and trust. Once your staff understands why something is important and how their decisions and actions influence outcomes, they can then start to take actions that are aligned with the inventory goals. In a well-managed system, there should rarely be an adrenaline rush. People should know what to do and what is expected of them. Before choosing to add or hold inventory, employees should ask themselves the questions, “Do we really require stock of this now and what are the alternatives to holding it”? Sometimes an independent third-party such as UPPRO, with extensive professional decision making expertise ,can better identify issues and accurately target the levers for improvement. Inventory management is about objectively defining and then communicating across all functional departments your areas of uncertainty and taking calculated risks.