Inventory Management and Planning Systems

In the supply chain, whether you are a warehousing, transport, retail or manufacturing business, cash is tied up in stock. Techniques for Planning and Inventory Management are often what differentiates a successful enterprise.

Organisations today tend to use computer systems of one sort or another to help manage their business. And most of them also have a good deal of cash tied up in inventory, from which they need to get a good return on the on-going investment. This forum brings together these two fundamental business concerns – effective use of business systems and getting value from money tied up in inventory - and considers how to optimise planning within the business system.

Business systems are designed to help plan production and manage inventory, but need to be given precise instructions in order to do so. These instructions need to be aligned to the business goals, but many businesses fail to effectively synchronise the vision and strategy of their business to the detailed inventory management and planning decisions needed to define the system parameters. This is precisely the challenge that this forum sets out to meet.

Inventory (or stock) covers all the goods and materials that an organisation holds or owns, and to which a business intends to add value before selling. Inventory is both an asset and a liability - inventory held ties up working capital (i.e. it costs money and therefore less is better) but it is needed in order to have something to add value to and sell (i.e. we need the inventory to ensure product availability).

Inventory Management example

When you go shopping, then you expect the retailer to have a suitable choice of items available. You don’t want old stock, and don’t want to spend a lot. How can the supplier meet everyone’s demands with fresh goods and stay in business so you can go back again? The answer is not divine intervention it is inventory management. The inventory manager has to use advanced techniques to optimise the balance of stock, providing the best customer service with the least inventory at the lowest operating costs. This is different from warehouse and stores control. The people in a store manage the movement and recording of inventory. Inventory managers need never to go near the stores as long as the stores personnel keep records accurate.

Inventory management balances customer requirements and costs. It is a central but hidden expertise that drives trading companies, supply chain businesses and manufacturers. Better inventory management is key to improving profitability by meeting more customer demand and at the same time reducing costs. Generally the businesses with the lower stock give better customer service.

Inventory management is dynamic – the stock levels set this week need updating continuously. There is the problem of accurate forecasting using history and information from the sales (often optimistic!), and arranging suitable stock levels and replenishment. Operating systems for businesses - ERP, MRP, Forecasting, Stock Control - are the tools to help, but the inventory manager has to decide how they should be set up and then modified in line with changing demand and supply situations. In addition, the Inventory manager is a communicator, suggesting to the sales team that delivery to customers yesterday may not be practical and pointing out to purchasing that buying two years’ worth to get a discount is probably not an overall saving.

As most companies these days use the same suppliers repeatedly, the role of inventory management has become increasingly one of managing the flow along a supply chain, and co-ordinating the inventory holding so that a minimum is held, located at the point where the customers can be supplied with a minimum of supply chain inventory and there are regular small deliveries to support this.

Planning Systems

Planning systems are there to optimise the resources of an organisation in the achievement of the business objective – how do we make best use of the organisation’s material, money, people and equipment to effectively meet the objective (e.g. customer demand)?

There are 3 key distinct steps:

FORECAST

→

PLAN

→

EXECUTE

The planning systems used in an organisation have to work with the strategic business decisions e.g. will execution be via MRP (manufacturing resource planning), ERP (enterprise resource planning), Demand Driven (DD) planning, theory of constraints dimensions, re-order point (ROP), Just in Time or Lean?

The strategic decisions made by an organisation must therefore impact the way forecasting demand interacts with planning, as well as how production is executed interacts with planning.

This forum has the opportunity to involve key aspects of businesses and interact practically with many other forums within Operations Management in particular as well as Logistics and Supply Chain and many other CILT sectors.

Forum Leaders

		Simon Eagle is an expert on the theory and practice of Demand Driven Supply Chain Management, about which he has written numerous articles and is having a book published a book in mid 2017. He is an endorsed instructor for the Demand Driven Institute / ISCEA Certified Demand Driven Planner qualification and works with companies that wish to assess, pilot and implement the Demand Driven approach to SCM.
		Dr Tony Wild is a specialist in optimising inventory. After having proper jobs in manufacturing planning, he now tries to stop others making  the same mistakes by lecturing and consulting. His knowledge on slow moving stocks got him enlisted by the University of Warwick, where he lectures on Procurement and Inventory Control M.Sc. courses. He runs entertaining courses for CILT at Diploma and Certificate level which provide real solutions to operating issues. Tony’s motivation is seeing improvements in company profits by applying the simple control and inventory techniques.   The application of the theory to practical situations has led to Tony to write “Best Practice in Inventory Management” and “Improving Inventory Record Accuracy” and creating the “Stock Manager” software package.  The books have been translated into several languages (but the software hasn’t yet).  Tony joined BPICS the year after it started and has been involved throughout the transformations through IOM to OM within CILT.     Bookings are now being taken for the rock band “No Direction” where Tony is lead singer/guitarist. However when there is no opportunity to perform or jam, there is a 1934 MG PA to drive and repair, league tennis to play, as well as road biking and windsurfing. This may be why writing the new books is a 10 year plan.  Fortunately the work on the “ideal house” bought in 2000 (minus roof) is now nearing completion.
		Catherine Milner is a Chartered Engineer and Chartered Fellow of the Institute of Logistics and Transportation (CILT UK), and sits on the Representatives Advisory Group of CILT UK. Catherine has over 25 years’ industrial experience, initially working in operational roles in Aerospace, Petrochemicals and Telecommunications. More recently, she has been in consulting and education, where she has worked with a varied customer base including manufacturing, retail, utilities and retail services.  Catherine has been involved with Supply Chain and Operations Management, Business Process Analysis, Project Management, Training and Workshop facilitation and Inventory Strategy Development. With a wide experience with MRP, EDI, Inventory Optimisation, Forecasting, Supply Chain and S&OP, she has been involved in systems implementations with an emphasis on people processes for long term cohesion, including process analysis and training.  An external lecturer for WMG at the University of Warwick, Catherine has delivered Logistics and Operations Management modules in Singapore, India and the UK. Her 2015 book, “Inventory Management in Business Systems” was co-authored with Geoff Relph. Prior to its merger with CILT UK, she was Chair of the Institute of Operations Management for 9 years.
		George O’Neil is a Chartered Fellow of CILT. He has spent his career working for consumer product companies, primarily premium drinks, within Supply Chain & Planning, Manufacturing, Customer Service, I.T.  & Business Services. He describes himself as a supply chain geek and is passionate about the ways people, process and technology can drive real supply chain improvement.