Different industries and companies will emphasize different supply chain attributes, depending on market demands and how the company competes.
A high-tech manufacturer providing aftermarket parts and services to business customers may prioritize speed and reliability over cost and asset efficiency, so it will structure its supply chain such that parts are readily available despite increased inventory costs and the cost of expedited orders.
On the other hand, a consumer packaged goods (CPG) company may focus on cost and reliability, seeking to balance a low cost to serve with sufficient inventory to fulfill customer orders on time in full.
2 key concepts underpin effective inventory management:
1) Clearly defined decision-making responsibilities and processes at strategic (horizon of over one year), tactical (short to medium horizon of two weeks to 18 months), and operational levels (immediate horizon of typically less than two weeks), and
2) Coordination across enterprise supply chain functions, particularly between planning and logistics.
Companies need to approach the supply chain and inventory management first at the strategic level, where fundamental decisions are made regarding the company’s business objectives. Once decisions are made at the strategic level, business decisions at the tactical level and, finally, the operational level can be addressed, with each level informing the objectives and decisions of the next level.
Decisions and objectives made at each level must be aligned; otherwise, the company’s strategy will not be realized, and conflicting policies will create sub-optimization.
The performance strategy should align with the company’s relative prioritization of the key end-to-end supply chain attributes: responsiveness, agility, reliability, asset efficiency, and cost. We must prioritize these attributes because of the implicit trade-offs caused by intrinsic supply chain dynamics.