basictraining
BY ART VAN BODEGRAVEN AND
KENNETH B. ACKERMAN
Inventory management vs.
inventory control
IS THERE A CONFLICT BETWEEN INVENTORY MANAGEMENT
and inventory control? Well, sort of. Not that most of us care, but the
purists can get a bit savage in defense of their position(s). To us, it
brings to mind the endless 18th century theological debates about
how many angels could dance on the head of a pin.
Pointless, but then so is the head of a pin.
The research is rife with differing opinions and definitions regarding what constitutes inventory management and what qualifies as
inventory control. One body of thought holds that inventory management is about “placement” (whatever that means), reordering, and
receiving/storage of inventory. Another maintains that inventory control is about location, reordering transactions, taking physical inventory, and cycle counting.
Still another guest expert promotes the purposes of inventory control
as being to reduce slow-moving inventories, to avoid
overstocks, and to use inventories effectively, consciously balancing investment against the monetary
consequences of unfilled orders. He follows that
thinking with eloquent discussions of some not-so-advanced concepts of min-max, two-bin, ABC stratification, and 30-day order cycle reviews to govern
replenishment actions.
Amidst the cacophony of voices weighing in on
the subject, Jon Schreibfeder is probably the most
cogent writer in the field today. He, btw, treats
inventory management and control as a holistic set
of simultaneous concerns.
incredibly more powerful in elevating corporate
performance than simply taking a hatchet to
whatever inventory happens to be close at hand.
So, in our view, this inventory subject must be
approached holistically, integrating planning (
management) and control (transaction execution) for
strategically optimal results. This perspective means
that focusing on specific and limiting definitions of
elements of either management or control (
however they are defined) is a loser’s game.
ALL THE PIECES OF THE PUZZLE
Not only is it important to work on both management and control components, irrespective of
where their definitions might
fall, but it is critical to recognize, and take decisions and
actions based on the understanding that what we would
call inventory management—
planning and strategies—does
have at least two distinct levels
of application.
The first circle of planning
begins with key elements that
many inventory specialists give
little thought to, which is why a
strategic supply chain perspective can make the difference between success and
failure. The process actually falls into what we
usually think of as facility planning, beginning
with geographic location(s) and site selection.
The strategic placement of facilities is, done
correctly, driven by customer locations, customer needs, customer order profiles, cus-tomer/product linkages, and customer service
requirements (influenced, in turn, by the needs
of the markets the customers serve). The process
includes development of product profiles for
specific facilities and specific missions, and must
include inventory profiles to support the initial
view of requirements.
WHY IS THIS IMPORTANT?
All too frequently, we collectively jump all over inventories as an
example of an area where supply chain management can contribute
to corporate financial performance. The focus is on reducing inventories and their attendant investments, thus beefing up the corporate
return on assets.
Sad. 20th century mentality in action. All wrong for the 21st centu-
ry. Not that we shouldn’t be reasonable and prudent about inventory
investment, but …
Our real contribution is not to continually cut inventories (despite
the importance of getting the junk out of the attic). It is, rather, to
have the right inventory in the right locations to satisfy customers—
if not make them ecstatic. The positive impact of high customer serv-
ice levels, coupled with managing the required investment carefully, is
