In today’s global economy, many companies still find it tremendously challenging to effectively manage the shared inventory of their warehouses around the world. The result is generally excess inventory in some regions and shortages in others, and can range from products for sale to spare-parts. There are many common reasons for this such as high levels of complexity, internal transfer issues, use of different item codes for same stock keeping units (SKUs), incomparable data, and technical feasibility.
There’s no doubt that benefits can be reaped by more effectively managing and sharing inventory across the enterprise. They can reduce excess inventories overall, and improve utilization. Companies can also focus on shifting slow moving inventory items to a region where the item is more active.
However, global inventory management has its typical hurdles. Companies need a system that provides good visibility into their global and regional inventories. They have to be able to create new types of inventory reports that help them address the issue of inventory visibility. Companies must also often make trade-off decisions between optimizing inventory and the cost of transferring items. In some cases, the internal transfer prices on their own can act as barrier for the operating countries as they can have a negative impact on the P&L.
To support our clients, REL, a division of The Hackett Group, often develops tools to help them in their decision making. With improved inventory data, companies can more effectively evaluate excess inventory positions and identify quick wins and long-term solutions, and develop a more pragmatic approach towards inventory management. Often, a good first step is simply to ensure that companies have a clear inventory ownership policy. Strong supply chain governance is also exceptionally critical if companies are to make these complex inventory management decisions.
At one client, we recently helped with the development of an interactive and dynamic tool to manage the utilization of their inventory at a global scale. The tool also helped the team to make decisions on positioning of the items. Special care was taken to develop a tool that was easy to understand and in line with the client’s requirement while closely aligning to their current practices.
To become world-class in inventory management and ultimately improve cash flow, companies must look into an often-ignored area of inventory sharing across their global warehouses which offer a great potential to reduce the overall inventory levels.