Going Beyond The Pretzel Fix
15 February, 2018 // Comedian Demetri Martin can make even the worst imaginable situations funny: “I think drowning would be a horrible experience,” Martin once said, “but I bet it would be a little less horrible if right before that you were really thirsty. Because then, you’re like, ‘Man, I could use a drink. Oh, that’s good. Whoa, too much!’ ”
Substitute “inventory” for water, and you get an idea of the frustrations supply chain professionals face. Inventory is their water, nourishing customers and sustaining the business. Too much, though, and you drown in capital costs, obsolescence risk, transportation and warehousing expense. Too little, and your salespeople go thirsty, and your customers go elsewhere.
This has presented an increasing and stubborn challenge over the past decades. Time was, customers were so thirsty that a manufacturer could stockpile lots of inventory. The company knew that it could offload some of the excess if needed. And, hey, better to buffer a little than risk running out.
Truth be told, that’s probably still an acceptable practice in industries with long product lifecycles and low carrying costs. For our customers, though, that world vanished a long time ago. For verticals like high tech, biotech, pharma and aerospace, matching supply with demand in real time is a high-stakes necessity. Outsourced supply chains, global customer bases and brutally short product refresh cycles have driven more than a few supply chain executives to drink.
Many approaches have been tried to solve the problem. Vendor-managed inventory (VMI) doesn’t completely solve the guessing game, but at least it offloads the pressure of being right to your suppliers.
Multi-echelon inventory optimization (MEIO) turns the complexity of a supply chain into a giant, multi-variable math problem. Solve for x, and you can optimize the right levels of goods at every node. Getting to the solution, however, requires getting a lot of information points right across regions, suppliers and changing conditions. We love algorithms as much as anyone, but data without deep experience and gut instinct doesn’t work.
That’s why we’re so positive on solutions like Morgan’s own Inventory On Demand™. It combines the best elements of visibility and big data analytics with outsourced inventory ownership and management. So, instead of buying product, our clients buy guaranteed availability at or near the desired point of fulfillment. Managing an efficient flow of goods to that endpoint becomes the supplier’s problem—and, truth be told, also their motivation for maximizing margin.
Since the outsource supplier owns the goods from the factory to fulfillment, there’s also a big savings on the capital required for inventory. How much would it be worth in your company to accelerate your supply chain by just one day?
Of course, Inventory On Demand™ isn’t the cure for all situations any more than VMI or MEIO are. That’s why we work hard to complement those approaches—or even recommend them in cases where they’re more applicable.
At the end of his riff, Martin decides he has an answer for the dangers of too much water. “That’s why I always carry pretzels with me when I go swimming,” he says.
If you’re ready to go way beyond pretzel fixes for your problems, we’d love to talk to you.