What is Strategic Inventory

While the integral role of supply chain, which includes inventory decisions, has become more obvious to everyone, and college degrees in supply chain are increasing, many manufacturers still see it as a renamed purchasing department.

Effective procurement is an important profession, but it does not define nor integrate inventory strategies into the company mission, core values, and strategy. If anywhere at all, that is likely the responsibility of planning or scheduling, or supply chain.

But do any of them really do that for your business?

Setting up parameters in your ERP system is not strategic inventory management. Nor is negotiating for volume discounts with suppliers. Both of those may be worth doing, but neither adds value in a vacuum.

Most inventory decisions today are based more on supplier pricing, lead-times, and financial scenarios. A company that is currently highly profitable pays little attention to inventory, until sales and profits sag or a major outage occurs. Then, all the sudden, things change.

It is important to gain meaningful understanding of the role of inventories in the business and operations strategies, and in accomplishing the mission consistent with core values. That is not a one-hour meeting. It is developing strategic thinking skills and line-of-sight connections from individual decisions to those elements.

One good question to start with is: “how would we know if our inventory strategy supported our mission, core values and business and operations strategy?”

Follow that with: “what changes to our inventory strategy could improve that interconnectedness?”