Are Inventories A Competitive Advantage?

Nov. 7, 2006
Companies reduce inventories by 20%-30%.

Companies that use new inventory management technology are reducing their inventories by 20%-30% according to a study by Aberdeen Group.

"We find that companies that are motivated to improve their inventory management can achieve very rapid returns using this technology," said Nari Viswanathan, research director, supply chain at Aberdeen Group. "The top performing companies do not think of inventory as a cost but as a competitive weapon."

Best in Class companies are twice as likely as other companies to leverage network design technology for supporting business growth decisions and outsourcing related decisions. Thirty six percent of these companies are performing multi-echelon inventory optimization (versus 17% of all companies.) A majority, 52%, have a forecasting system that supports customer-level forecasting (versus 27% of all companies.) Best In Class companies were defined by Aberdeen has having customer service levels of 96% and above and that have simultaneously reduced inventory.

The study found that a majority of survey respondents, 83%, are actively looking into ways to improve their inventory reduction strategy.

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