It could be assumed that several decades after supply chain management practices such as ‘lean’, ‘build-to-order’ and ‘just-in-time’ became accepted across industry, inventory levels would have seen a steady and inexorable decline.
However, the latest report by Transport Intelligence, Inventory Benchmarking Vertical Sector Trends, has found that the stock held by manufacturers and retailers, as measured by Days of Supply in Inventory (DSI), has actually risen over the past ten years.
This data, based on the financial reports of 187 manufacturers and retailers located around the world reveals that, on average, companies in 2017 were holding 10 more days stock than in 2008: increasing from 80 to 90 days. The research also found that the retail industry operates with the lowest average DSI: 33 days in 2017. At the other end of the spectrum, the pharmaceutical sector operates with an average of 186 days.
According to one of the authors of the report, Professor John Manners-Bell, this indicates that reducing inventory levels is just one of a number of competing goals for many companies. “Despite the textbooks telling us that inventory reduction should be the main goal for supply chain managers, the present market environment requires a far more sophisticated approach, balancing a range of important objectives.”
Examples of this new approach include Walmart, which now regards the availability of stock to purchase by consumers as a major factor in its existential battle with Amazon, despite the inevitable consequence of higher inventory. Lenovo and Hewlett Packard took a similar approach to building up inventory in order to maintain product availability in physical stores in contrast with Dell’s lean inventory strategy. Risk is also a factor, as companies seek to avoid the supply chain problems they faced after a number of high profile disruptive events in the early part of the decade, such as the Thai floods and Japanese tsunami.
Co-author, Andy Ralls, added, “A focus on achieving an appropriate amount of inventory is and always will be hugely important to efficient supply chain management. However, as our research shows, competing priorities, be they driven by e-commerce, changing customer demands, product development, risk or even regulatory requirements, have caused many companies to fundamentally assess their supply chain strategies.”
About Inventory Benchmarking Vertical Sector Trends
A critical benchmark for inventory management. Inventory Benchmarking Vertical Sector Trends compares many of the world’s leading manufacturers and retailers against key financial supply chain metrics.
In particular it:
The report also includes exclusive access to an online data pack with interactive charts, tables and downloadable data.
Find out more about the report by clicking here
Source: Transport Intelligence, June 24, 2019
Author: Transport Intelligence
