Forecasting: Strategic Inventory Management

Dec. 28, 2006
Efficient inventory management could provide a competitive advantage.

Traditionally viewed by manufacturers as a way to become lean and reduce costs, inventory management could be a new competitive weapon in the battle for customers. At least that's what a recent study by analyst firm Aberdeen Group Inc. suggests.

The survey of more than 160 manufacturers shows 27% of companies consider inventory management as a way to gain market share through superior service and product availability. One reason for the shift in thinking is global sourcing, which is putting more pressure on companies to improve their inventory processes because of increased lead times, variability and inventory carrying costs, according to the study.

Respondents also cite a need to improve return-on-invested capital to reduce order-to-delivery cycle times as one of several reasons for re-evaluating their inventory management systems.

Aberdeen Group says the most successful companies are more likely than their peers to use multi-echelon inventory optimization, supply chain visibility systems and a forecasting system that supports customer-level forecasting.

Among the analyst firm's success stories for using such technology is pharmaceutical manufacturer Organon International Inc. An inventory optimization solution helped the Roseland, N.J.-based company improve forecast accuracy 20% to 30%, resulting in stock reductions at its manufacturing sites of 10% to 15% while maintaining a 99.9% delivery reliability.

Primary Goal For Improving Inventory Management
Lower inventory carrying costs 63%
Gain market share 27%
Improve customer service levels 8%
Growth support for new sales channel/geography 3%
Chart: Margaret Bangs

See Also:

About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!