In a recent industry report, AMR Research analyst Wayne McDonnell provides an innovative take on that age-old quest of lean manufacturers: decreasing inventory. McDonnell hails from the life sciences sector, which, he says, averages inventory turns of 2.5. “This isn’t exactly impressive for an industry that’s been pursuing Class A, lean, or operational excellence initiatives for years,” he writes. “Why can’t we significantly move the needle on inventory turns?”
The answer, in pharma and elsewhere, may be that manufacturers have identified the correct destinations but tend to follow the wrong paths toward them. Although improving inventory turns and decreasing safety stock are admirable pursuits for lean aspirants, the means of achieving those goals are as important as the end results, McDonnell says (see report, subscription required).
The best strategy, he says, begins with a series of questions:
- How can I increase demand forecast accuracy?
- How can I minimize the latency of key demand or consumption data?
- What options do I have for late-stage postponement of finished goods inventory?
- How profitable are all those items in the long tail of my product portfolio?
- Do I really need all those raw materials, or can my supplier hold some inventory?
I’ve clucked about product proliferation before, so I’m particularly inclined to support an analysis of the “long tail” of the product portfolio. And I would add another to the list: How profitable are the customers in the long tail of my client database? In recent years we’ve seen a burgeoning realization that not all customers are created equal. That tried-and-true mantra, “The customer is always right,” may yield the more disciplined: “Find the right customer.”
Regardless, these are all keys questions, and worth adding to your lean plan. Are there others you ask in your pursuit of improved inventory?
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Asking the Right Inventory Questions
In a recent industry report, AMR Research analyst Wayne McDonnell provides an innovative take on that age-old quest of lean manufacturers: decreasing inventory. McDonnell hails from the life sciences sector, which, he says, averages inventory turns of 2.5. “This isn’t exactly impressive for an industry that’s been pursuing Class A, lean, or operational excellence initiatives for years,” he writes. “Why can’t we significantly move the needle on inventory turns?”
The answer, in pharma and elsewhere, may be that manufacturers have identified the correct destinations but tend to follow the wrong paths toward them. Although improving inventory turns and decreasing safety stock are admirable pursuits for lean aspirants, the means of achieving those goals are as important as the end results, McDonnell says (see report, subscription required).
The best strategy, he says, begins with a series of questions:
I’ve clucked about product proliferation before, so I’m particularly inclined to support an analysis of the “long tail” of the product portfolio. And I would add another to the list: How profitable are the customers in the long tail of my client database? In recent years we’ve seen a burgeoning realization that not all customers are created equal. That tried-and-true mantra, “The customer is always right,” may yield the more disciplined: “Find the right customer.”
Regardless, these are all keys questions, and worth adding to your lean plan. Are there others you ask in your pursuit of improved inventory?
To receive the Lean Matters newsletter, sign up here.