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Trends in Inventory Optimization

John Sharkey, senior vice president for supply chain consulting at Spinnaker, discusses how Spinnaker's clients are employing inventory optimization and supply chain network modeling to meet specific service requirements without excess safety stock.

Trends in Inventory Optimization

Spinnaker’s consulting work with numerous clients in the areas of strategy, planning, processes and technology gives it an early view to rising management trends. “What we are seeing with clients today is greater use of inventory optimization tools, on top of their advanced planning functionality, to get better end to end planning,” he says.

Many of Spinnaker’s clients already have implemented fairly robust demand planning and supply planning processes, Sharkey says, “but they still are managing inventory in an old single-echelon approach. Inventory optimization is the newest tool in the advance planning suite and it enables companies to look at the whole supply chain, end to end, and figure out where they want to position inventory and how much safety stock they should have at each level – and it does that in a way that optimizes things across the board.”

The hardest part of implementing an IO solution is getting the data right, Sharkey says. “You have to really think through the policies you want to enact in your supply chain and the kind of service you want to provide your customers, being very explicit about lead times. There are policy trade-offs you have to think through because inventory optimization tools do a good job of translating those policies into how you should run the business.”

Tools like LLamasoft’s Supply Chain Guru help companies understand the relationship between lead times and inventory placement, Sharkey says. “You don’t want to position inventory right next to the customer in every case, but you need a good modeling framework and tools like IO to help you know when that is the right decision.”

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