Demand-Driven Inventory Optimization and Replenishment: Creating a More Efficient Supply Chain

CHAPTER 8

Inventory Optimization in the Real World: Matas A/S

We started our examination of inventory optimization by exploring the inherent shortcomings found in company enterprise resource planning (ERP) systems and the resulting inefficiencies flowing through the supply chains. We have looked at how inventory optimization can correct these shortcomings by evaluating the costs attributed to service level requirements down at the granular item/location pairing. Finally, we have seen how organizations have tested the theories found in inventory optimization on their own data.

As we have moved along this pathway we uncovered that leading-edge organizations have found tremendous results. In many cases, inventories have been cut by 20–30 percent while there have been increases in service levels at the same time. Countless proofs of value (POVs) have been done, and yet inventory optimization comes across as something only visionaries have access to. Why is it that a tried-and-true technology with proven results gets placed into the “interesting, but I don't know if it will work here” point on inventory management project lists?

In all my travels and interactions with inventory management professionals, I continually come down to a single, pervasive question that splits into two directions:

The question:

“We have tried to reduce inventories, or we have tried to increase our customer satisfaction levels, but in almost every case it was a temporary action that withered away over time. ...