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Supply chain time and inventory July 31, 2007

Posted by yajamans in Logistics, suppply chain.

untitled1.jpgMost of us are quite familiar with the fact that supply chain lead times directly affect the inventory that we need to hold. Each extra day from order to delivery means an extra day of inventory and some amount of safety inventory to compensate for the increased uncertainty.

It is probably a less appreciated fact that the amount of inventory itself adds to the supply chain lead time. This happens when new product launches come into the picture. The more inventory that is there in the supply chain, the longer it will take for the end consumer to experience the new product.

Some companies spend a lot of money in flushing out the old inventory from their warehouses by offering TPRs, one-for-one offers, etc. The net result is simply a transfer of inventory from one player to the other. It will now sit with either the distributor or the retailer or the pantry in the consumer’s house.

Hence careful planning of old inventory needs to be done in order to ensure that the consumer gets to experience the new product within a few weeks of it being launched in the market.



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