![]() Will we return to the halcyon days of pre-pandemic inventory management? Or will larger safety stocks, with determinants programmed into inventory management formulae, be the order of the day? Have we seen the peak use of “just in time” inventory management? What do you think? When the smoke has finally cleared and flows of goods have become more plentiful and dependable, how will industry respond? Surely inventor-to-sales ratios will come back down, but to what extent? What we had come to take for granted then exploded in our collective faces. US auto manufacturers, following Toyota’s lead, were at times maintaining just half a day of inventory of some parts supplied domestically-until the pandemic. "What we had come to take for granted then exploded in our collective faces." Customer service, as measured by stockouts, improved. Logistics as a component of the total cost (transport plus inventory) of doing business came down. The amount of inventory needed to support a given sales level shrank. The result, of course, was what came to be known as “just-in-time” inventory management, as championed by firms such as Toyota. Both made a strategy with less safety stock more viable. Over the years, information technology contributed to more complete knowledge about inventory status as well as more dependable transport. I found significant value-expressed in lower inventories and fewer out-of-stock situations-in channel-wide inventory knowledge. In another, they had full information about inventory quantities at every level in the channel. In one simulation, students had little knowledge of inventory levels other than those for the company they were managing. Fluctuating demand at the retail level would generate exaggerated fluctuations-a “whipsaw” effect-in expected demand and inventory planning at the back end, or manufacturing level, in an effort to meet possible future demand. In my approach, my Ohio State students managed inventory at various levels in a distribution channel. One thing that may have helped generate the HBS offer was an experiment I performed using my own crude version of what would become known as the “beer game.” ![]() One of my interests: The value of improved inventory information in a distribution channel on overall inventory levels and costs. "The result, of course, was what came to be known as 'just-in-time' inventory management, as championed by firms such as Toyota." In those days, there was fascination with air freight and the trade-off of inventory and transportation costs-as in spending more for air transport in order to spend less on owning inventory, thereby optimizing what we called the “total cost curve.” (I can still draw those curves in my sleep.) A plentiful supply of “safety stock” was the order of the day for those using slower forms of transportation. I was invited to join the HBS faculty not to teach marketing, service management, or general management, among my later teaching assignments, but to help breathe life into efforts to teach logistics. It’s a throwback to the days when railroad management was all the rage in the original Harvard Business School curriculum among those interested in studying business in 1908. Logistics issues have taken on unexpected and possibly unwanted “glamour” among those who study business and economics, thanks to the COVID-19 pandemic and its global aftermath. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |