Inventory Management’s N°1 problem

Dear Readers,

In March 2010, just after Global Financial Crisis of 2008, a question on Inventory Management was floated on one of the discussion platforms of LinkedIn (old version). The question had received an overwhelming number of comments from across the globe and industry sectors i.e. +513.

Question: Professional Managers – what is your N°1 problem in managing your Inventory?

The thread was followed for almost 8 – 9 months to have the maximum number of inputs. The raised question is simple & probing with its own emotional wavelength, supply chain experts know best. While reading all the +513 comments it was observed – the participants have vast experience in Inventory Management & have healthy know-how of Demand and Supply Chain.

Broadly 10 – 15 arguments were repeatedly raised by all participating professionals, bringing the total strikes were drilled down to 480 strikes for all points. We maintained 10 categories for the sake of writing & raising the argument. Figure 1 summarizes 480 strikes in percentage points with in “10 Categories”, based on participants’ descriptions. The total number of categories could have been modified as a function of arguments presented at any granular level.

Earlier we were of the perception that “Accuracy in Demand Planning & Forecasting” (which emerged as 2nd main reason) is a premier cause of inventory management problems. Due to perception, there’s a lot of emphasis on demand planning and both Quantitative & Qualitative methods have been explored & exploited. Yet, as per responses gathered, the potency of process execution outweighs the perception, by popular vote (let’s say it this way). Looking at Figure 1 we were surprised. It was amusing to see that 1st and the biggest reason for Inventory Management problems are 'Supply chain management/optimization processes are either not adequately followed or process designs were less than what they should be'. On the other hand, if percentages of 1st, 3rd & 5th points of Figure 1 are added we may conclude that +50% of inventory management problems are due to Human Factors.

It gives some food for thought. Process execution, System exploitation, Process designs & flexibility, People training, Human errors, Culture, Management, & Strategy – all play significant roles to have the right Supply & Demand balance. A lot of research had already been done and mountains of literature have been written & published. The “how’s & what’s” of each aspect, what is loosely defined here as Human Factor, were striking a score of +50%. It seemed we were back to square one after all the hoopla of processes & techniques creations.

Hope you enjoyed reading it.

Best Regards