How to manage our supply chain---- inventory optimization is a capability problem

How to manage our supply chain---- inventory optimization is a capability problem

For the enterprise, inventory optimization can't just go to the result. We know that the outcome depends on the ability: the ability does not change, and even if the result changes, it can't last; if you want to change the outcome permanently, you have to change your ability. The ability is an organic combination of organization, system and process.

As far as the system is concerned, the information system generally lags behind when the company starts, and its shortcomings are compensated by the organization, such as decentralized management, and the decision-making power is decentralized to the grassroots. Later, on the information system, especially the professional system, such as the planning system, the short board changed from the system to the organization: the people who were scattered at the grassroots level for decision-making were mostly part-time, with insufficient professional ability and no ability to use professional systems. This is like a primitive man who only uses a stone axe. You now give him a rifle. He naturally can't use it.

As far as the inventory plan is concerned, we implement the planning software, which aims to give planners better tools to make up for the shortcomings of organizational capabilities; now they have no ability or willingness to use your tools, if you do not want to continue the original extensive practice, It is necessary to consider the professionalization of the organization and let the professionals do professional things. That is to say, the inventory plan is concentrated in the hands of a few capable planners: these people are better able to figure out how to use the rifle and better connect the system and organization.

What about the rest of the people? Let them continue to work at the level of experience, not to make planning decisions, but to closely connect with sales and customers, manage changes, and communicate to professional planners in a timely manner. In other words, their focus is on the process: establishing, strengthening the docking process with the demand side, managing the demand, managing the customer, and managing the changed things to make up for the system's shortcomings. Be aware that for inventory planning, the core is data and algorithms, not people and processes—people and processes complement the core data system, and data and algorithms are primarily included in the planning software system.

To optimize inventory, you must change your capabilities. The ability does not change and the results will not last. For example, if there is a manufacturer and the inventory is high, the supply chain director in charge of inventory has always thought of optimizing the inventory, and analyzing the excess inventory analysis, or it is not necessary; this time, after a long time, it has accumulated a lot. Inventory is always in an unoptimized state: there is no need, no need for a lot. The problem here is the same: you can't expect to change the outcome to change the outcome; you have to change your ability to change the outcome. For this manufacturer, the capabilities here are primarily processes and organizations.

As far as the process is concerned, the two processes directly lead to a large inventory problem of the company: one is the design change process – the R&D and the supply chain are not well connected, the new item number is not consumed as much as possible when the new item number is imported; the other is the sales And operational coordination process - in the demand forecast, sales and operations can not effectively interface, resulting in low accuracy of demand forecasting. Therefore, to solve the inventory problem, you have to improve these two processes.

Of course, when improving the process, it will naturally involve organizational issues, including the establishment of a system of accountability. For example, the excess inventory caused by the design change was previously paid by the supply chain. Now it is necessary to pay for the R&D; the inventory caused by the failure of the demand forecast is also responsible for what is responsible for the supply chain, which ones are paid for by the sales, and how long after the backlog is paid by the sales, etc. Have to define clear rules.

In some companies, when it comes to inventory issues, the supply chain habitually points the finger at two internal customers: R&D and marketing, posing like a victim, but forgetting what else they can do. This is like playing cards, the same bad card, different people playing different results: in addition to the impossible, there is something to do - the internal customer gives you the demand is like a bad card, but you can not take A bad card is used as a reason to cover up your shortcomings and inaction. This is also an organizational issue and an organization issue in the supply chain.

In this manufacturing enterprise, the shortcomings of the supply chain are mainly the ability of planners. In the inventory plan, it is a typical head shot, expensive, not afraid to plan less, cheaper than dare to plan - analyze their extremely short raw materials (defined here as zero or less than one week of hand) It was found that 46% of the unit price was less than 10 yuan (of which 7% was less than 1 yuan and 39% was between 1 yuan and 10 yuan, as shown). The solution, very simple, is to add two weeks of safety stock to those cheaper units with a unit price of less than 10 yuan, only need more than 800,000 yuan of investment, for a company with more than 500 million inventories, it can be described as a However, it solved the 46% extreme shortage problem and greatly improved the inventory rate. This is not rocket technology, nor does it cost a lot of money to hire IBM consultants to tell you; as long as a little analysis, the cavemen know that the problem is there. You said, is this a half-dollar relationship with R&D and marketing?

Of course, some of these cheap item numbers are soaked goods, such as paper boxes, which are too large to be prepared on site, and the suppliers are in the vicinity and ready to ship. The rest, the plan manager said, did not cause any problems. Yeah, whoever saw a screw for 5 cents, have to find a plan manager to pick up the goods? But when you are out of stock, someone has to call that, not the production line, or the purchase; not the purchase, the planner. No matter who is urging, his resources can be invested in higher returns. We can't think that there is no problem because the problem has not affected us. This is not the case, the production line is complaining, saying that the rate is too low, the existing stocks are not moved to the production line, afraid to be taken away by others; moving in, there is no place to put. Nearly half of this problem is caused by cheap materials.

You can't think that no one complains will be fine. The problem is in the data. Planners are not accustomed to analyzing data, but rely on feedback from internal customers. This plan is doomed to fail to do so. It is an organizational issue.

Figure 1: Reluctant to spend money on cheap item numbers, resulting in a 46% shortage of case companies

How does this organization short board complete? Introduce the inventory planning methodology “starting from mathematical statistics and ending with professional judgment”. For those who have no ability, they should be trained; if the training can not solve the problem, they must be replaced. Regrettably, in some companies, the status and treatment of the plan is too low to attract top-notch employees; it is hard to train and can't stay. This is another organizational issue that requires management to devote more resources to better resolution of the program function.

In the case of e-commerce, inventory optimization is a common phenomenon. Just go to which e-commerce, you will find that one side is a dead inventory, the other side is to urge the goods again and again, expedited express. This is still going back to capacity building: organization, processes, and information systems.

When I visited an e-commerce company, when I talked about the plan, the newly appointed plan director said that it was replenishment from beginning to end. You know there is a problem: replenishment is not the key; the key is demand forecasting and inventory planning – both of which drive replenishment. What is the problem? Organizational issues: If this person is a planner, you may be forgiven; but his position is a plan director, and one will be incompetent and exhausted, which is a big problem.

Although it is an e-commerce, the information technology of outsiders is heard, and it is floating in the clouds. In fact, the e-commerce level of many e-commerce is quite low, and some even have no ERP. ERP also often cannot run MRP, orders, replenishment. They are all done by hand. As a result, employees spend a lot of time doing information systems, and objectively cause employees to have no energy to improve and do higher value-added things.

In terms of the process, the shortcomings of e-commerce are also very prominent. For example, there is a B2B e-commerce, the supply chain always complains, saying that sales can not be bought. Sales ask, what do you want us to sell, and you don't give us a list. Although e-commerce is mainly based on selling, it is still necessary to first accept the purchase in terms of buying, focusing on the boutique strategy and selling only the ones that can be bought. What is reflected later is the process of coordination between sales and operations. Without changing these organizational, system, and process issues, the e-commerce inventory problem cannot be completely resolved.

1. Demand forecast + demand management: the first line of defense in the supply chain

All predictions are wrong, but the mistakes are not the same. The goal of demand forecasting is to “make it as accurate as possible and correct it as soon as possible”: First, how to effectively connect sales and operations, “start from the data, end by judgment”, and make a “predicted error with the highest accuracy”, and strive for the first fate ? Second, the prediction is wrong, how to effectively manage the demand, find out as soon as possible, correct and remedy as soon as possible? Third, how to effectively implement demand forecasting and drive the effective response of the supply chain?

2. Inventory plan + inventory control: the second line of defense in the supply chain

What if the demand forecast is wrong? The natural response of the supply chain is to set up safety stocks. Scientifically and reasonably setting the stock level is the key to putting the right stock in the right place, improving customer service levels and reducing inventory. We will also discuss inventory control in detail: First, inventory is an angel and a devil. How much is appropriate? Second, the inventory has repeatedly risen and risen repeatedly, becoming a "fighting monster", how to deal with it? Third, information asymmetry causes the bullwhip effect. How to exchange information for inventory?

3. Supply Chain and Supplier Management: A Practitioner's Perspective

The goal of the supply chain is global optimization. Why is local optimization prevalent? Suppliers are responsible for most of the value-added activities in the supply chain. How to solve the problem of “choose, no management”? How to do "big purchases" and focus on the strategic resources of suppliers? The training focuses on the overall view of the supply chain, promotes cross-functional collaboration to optimize design and reduce costs; select and manage suppliers, effectively manage supply chain risks, and systematically improve supply chain performance. This also includes customer-specified suppliers and key sub-supplier management.