Is Optimisation Software enough?

I am constantly requested to look at inventory optimisation software recommended to be the solution to all inventory challenges. However, achieving optimisation involves so much more. No matter what software is deployed inventory optimisation requires collaboration between all your supply chain partners.

Would an inventory optimisation software package be the solution to this situation for small and medium sized organisations (SMEs)? On its own, the cost of the software to the company would outweigh benefits received.

There is so much more involved in optimising inventory levels than being able to monitor the situation online. Often these missing elements are what SMEs require more than another piece of software. An essential element is the ability of management teams to develop both internal and external collaborative relationships across their supply chains.

When management is unable to align internal functions of the organisation inventory management becomes an impossible task. Utilising an IBP or a S&OP process promises to be the backbone to aligning the supply chain to the rest of the organisation. However, not all make a concerted effort to implement. Where this process is in place the results are often disappointing. One of the main contributing factors for both scenarios remains the lack of ownership or involvement of the executive team.

From an external point of view, collaboration with partners is seldom performed at the required level. Arm length transactions between buyer and seller still dominate. Even though true collaboration has shown better results in reducing lot sizes, lead times and overall costs many SMEs are not able to invest the time and expertise to develop this area.

Inventory Optimisation requires collaboration between all your supply chain partners. It remains the area where most traction is possible in managing inventory levels. Sharing of information, aligning processes and stable pricing are just a few areas that can encourage improved levels of trust which in turn lead to improved supply chain metrics for all parties.

Optimation software has a supporting role to play in the management of inventory through adding visibility of the situation but many SMEs could find the cost of such software prohibitive.

By having a substantial level of knowledge on aligning end-to-end supply chains, working closely with partners, carefully formulated inventory strategies and a strong desire for change, improved inventory holdings are realised.

It is the focus of my company to raise the levels of performance of supply chains through ensuring partners are carefully selected and clear roles assigned with achievable objectives. Without external support inventory optimisation will remain on the organisation’s wish list.