Tactics > inventory management
Build confidence,
not inventory
Integrating your
n many respects, good inventory
ordering processes
management is having the knowledge
of what you can do without. At the
most basic level, retailers hold more

with your vendors’
I
Easily available,
inventory than necessary. And there
are two key reasons for this: 1) they
impartial,
supply chains can
lack confidence in supply, either because supply
is poor or because they are concerned that
it might suddenly get worse; 2) they are not
and accurate
improve your stock confident in demand—in other words, they are
not sure what customers are going to buy, so to
performance
levels and your
maintain customer service levels they hedge by
carrying more stock than is necessary. When
lead times are long, such as when sourcing from
data enable
customer service the Far East, this problem is exacerbated.
Merchants spend a great deal of time and
you and your
effort on forecasting demand. To some extent
this is a black art, but you are far more likely
to achieve greater accuracy if you involve
supplier to
the supplier in the forecasting process. This
is partly because two heads are better than
focus on the
one and partly because, unsurprisingly, most
manufacturers are more knowledgeable about
their own brands than are the marketers
issues
through which they sell.
Unfortunately collaborating on forecasts
is not as easy as it sounds. Issues of trust, ego, supplier forecasting software, you can now
and the overall power relationship between integrate any number of suppliers.
buyer and supplier can make this process more Real-time visibility into order status and
challenging than it should be. And there are performance over time provides you with the
practical issues that until recently technology confidence necessary to reduce ordering excess
struggled to overcome: Whose forecast should stock “just in case”. After all, when you place an
be the starting point? What if both parties order, you’re likely to be more confident in the
have equally sophisticated forecasting tools fulfilment of that order if
provided by different IT vendors? How
do you “normalise” for different product-
code terminology, product categories,
*
the acknowledgement explicitly includes
quantities and ship-to locations.
and time periods? And from a technical
perspective, how does either party get
the final consensus forecast into its
*
for long-lead-time products, manufacturing
status updates are provided.
system on a regular—perhaps weekly or
monthly—basis?
Internet-based business-to-business
*
for short-lead-time products, current
supplier stock levels of finished goods are
integration and software-as-a-service indicated.
(SaaS) delivery models now enable
genuinely shared environments
for collaborative forecasting, and
*
shipping information is sent before delivery.
not just with a small number of
suppliers. Using a simple web
*
changes to any of the above are
communicated in a timely fashion. We all
By Anthony Payne
interface or through direct know that circumstances change and that
integration with buyer and/or suppliers may not always be able to ship in
24
Catalogue e-business www.catalog-biz.com
ceb175.indd 24 7/11/09 13:10:13
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