Executive Briefings

Inventory Planning & Optimization: Mid-Tier Collaboration Between Planning and Product Development

Analyst Insight: Maturation of inventory management in organizations often follows a somewhat linear path from the technical basics of planning to the organizational issues encountered in sales and operations planning (S&OP). Coordination between product development and planning may not be the last hurdle, but it has been a major stumbling block that many mid-sized firms are increasingly overcoming.

Product development running late? Supply chain plans being thrown into chaos? Supply shortages, last-minute airfreight shipments, missed market launch dates, canceled orders, unhappy customers - sound familiar?

In all but the very best firms, these problems are extremely familiar to product development, purchasing, manufacturing, marketing, sales, and senior management. Increasingly, however, mid-tier firms are making significant strides in addressing some of the issues. The major elements in well-integrated processes include:

• A product development plan that involves others at an early stage;
• A meaningful "gate" system that includes items needed by other groups - bills of material, product specifications, artwork, etc. (with reasonable time allowances for manufacturing and transportation);
• Clear guidance on costs;
• Standardization and use of common components; and
• Extensive, effective communications.

The results speak for themselves: minimum inventory, higher customer satisfaction, reduced costs, and last - but not least - less risk (and stress!) for all.

The Outlook

Full awareness of the cost implications by all groups is the first step, and one that is increasingly being taken by smaller and smaller firms. However, it is important to recognize that the solution can be far from complete and still yield meaningful benefits. The first, most elementary steps - such as standardizing part numbers, key dimensions, or packing cases - often provide the greatest results for the least effort.

Product development running late? Supply chain plans being thrown into chaos? Supply shortages, last-minute airfreight shipments, missed market launch dates, canceled orders, unhappy customers - sound familiar?

In all but the very best firms, these problems are extremely familiar to product development, purchasing, manufacturing, marketing, sales, and senior management. Increasingly, however, mid-tier firms are making significant strides in addressing some of the issues. The major elements in well-integrated processes include:

• A product development plan that involves others at an early stage;
• A meaningful "gate" system that includes items needed by other groups - bills of material, product specifications, artwork, etc. (with reasonable time allowances for manufacturing and transportation);
• Clear guidance on costs;
• Standardization and use of common components; and
• Extensive, effective communications.

The results speak for themselves: minimum inventory, higher customer satisfaction, reduced costs, and last - but not least - less risk (and stress!) for all.

The Outlook

Full awareness of the cost implications by all groups is the first step, and one that is increasingly being taken by smaller and smaller firms. However, it is important to recognize that the solution can be far from complete and still yield meaningful benefits. The first, most elementary steps - such as standardizing part numbers, key dimensions, or packing cases - often provide the greatest results for the least effort.