It’s not a surprise to me! The aftermarket isn’t concerned about inventory reduction. In fact, inventory levels ranked dead last in our most recent survey. Either the opportunity to reduce inventory further is low e.g. the current inventory policies are satisfactory. Or, organisations are worried that any attempt to reduce inventory will impact availability and ultimately revenue and profit.
Since our respondents selected increasing service level and availability as the #1 focus, I’m going to assume that there is still room to reduce inventory levels. (In fact, the survey questions about systems to change and when to change them point to this conclusion. Inventory management is still an area of importance but it isn’t the most important and it’s not on the 3-year plan). The focus is on availability, which is a key driver for revenue, margin and customer satisfaction.
We asked more than 120 aftermarket professionals to rank the following:
- Inventory reduction
- Improved inventory balance across my network
- Increased availability/service level
- Planning the dealer
- Planning repairable spares
- Lower operating costs
- Consistency in policy and procedures
- Improved order process and fulfillment
- Implementing common supply chain KPIs
The ranking has not really changed over the last year. Availability was #1 in 2013 and 2014. There was a slight shift (lower) in the importance of improving inventory balance. However, this shift is misleading. When I dug into the data further, inventory balance was ranked highest overall. Very few people ranked inventory balance at the bottom, and lots of people ranked it as somewhat important. Fifteen-percent indicated that inventory balance was #1.
A few other interesting conclusions can be drawn from this ranking:
- If repairable parts are important to the business, it was ranked #1 or #2 in importance.
- KPIs and automation are generally ranked low on the list of importance
- Dealer inventory management, often called RIM, ranked high for about half of the respondents
|Increased Availability||Increased Availability|
|Planning Repairable Spares||Planning Repairable Spares|
|Inventory Balance||Order Process & Fulfilment|
|Order Process & Fulfilment||Inventory Balance|
Only you know if these priorities are in-line with your company’s planned 2015 projects. However, you can look at the list and determine that some goals should be considered and addressed as a group. Addressing repairable spares and order process and fulfillment at the same time can help you put the right processes in place. Improving your inventory balance across supply chain will naturally improve your availability and service. Syncron can help you determine which warehouse is optimal for stocking, where you can move inventory within a region and which inventory should be held in stock.