Study: Managing Supply Chain Inventory is the Priority

The importance of reducing or eliminating inventory has long been known to lean disciples (even if standard accounting practices mistakenly think inventory is an asset). A new study shows that increasing numbers of companies with global supply chains also are coming to understand what inventory is all about.

            The study, conducted by Aberdeen Group and partially sponsored by software vendor E2open, was based on a survey of more than 200 enterprises.

            It found that inventory management is the top priority for companies, with nearly two-thirds of respondents indicating that they are re-evaluating their inventory management process and technologies.

            The second-place priority, which Aberdeen said was “very closely behind” inventory management, is supply chain visibility.

            The study also said that innovators are 1.5 times more likely than all others to indicate that globalization is their top driver for supply chain improvements. (An Aberdeen news release announcing the results of the study did not say how a company was classified as an “innovator.”) Another driver Aberdeen mentioned is new customer-specific fulfillment mandates.

            'Aberdeen's research validates conclusions we've drawn from our customer base that industry leaders are achieving operational excellence by executing key supply chain transformation initiatives, such as globalization, lean demand-driven, low cost country-based sourcing, outsourced manufacturing, process automation and trading partner integration,' said Lorenzo Martinelli, senior vice president, E2open.

            Like many Aberdeen studies, this one has a significant focus on technology. The study notes that five times as many companies plan to spend more on new supply chain technology in 2007 than plan to spend less. Overall, 41 percent of respondents, and 77 percent of large enterprises, plan to spend at least $500,000.

The supply chain infrastructure areas companies said are most important include:

• Supply chain management exception and alerting platforms (52 percent)
  
• Master data management (47 percent)
  
• Business process management (46 percent)

            Certainly, we’ve seen shifting emphasis in the lean community in recent years, with growing focus on the supply chain and not just on in-house operations. It’s an area of vast opportunity, and one I suspect will be the center of increasing numbers of lean initiatives in the years ahead.