How is globalization changing inventory policies?

Properly managed, inventory policies drive revenue and increase efficiency. But as the nature of supply chains change, so must the policies.

Traditional inventory management practices are being made obsolete by the complexity of global supply chains and contract manufacturing, more dynamic product life cycles, and multichannel distribution.

The Technology Strategies for Inventory Management Benchmark Report from Aberdeen Group, based on a survey of more than 160 manufacturers, indicates best-in-class companies—defined as those with customer service levels above 96 percent, combined with reduced inventory carrying costs—are twice as likely as their peers to do perform these actions:

• Adopt multi-echelon inventory optimization
• Implement a supply chain visibility system
• Use a forecasting system that supports customer-level reporting

The best in class are much less likely than their peers to rely on simple rules of thumb for setting inventory policies. Multi-echelon inventory technology globally optimizes policies across supply chain tiers, accounting for both demand and supply variability using a stochastic (probabilistic) approach versus a rules-based or deterministic approach that doesn't account for variability.