How do you best decide where Inventory is kept, centrally, locally or at your SUppliers.
The Obvious answer is it depends on proximity and variability, but I am interested in what other elements you take into account for best fulfilling your customer's demands?
Depending on the industry, location and items stored, i think that a combination of all three would be required.
The industries that I work with in the direct space required on site storage for critical products but there needs to be careful management as the list of critical spares tends to lengthen with time.
if you are not a 24/7 operation, i would have a VMI process in place for any non critical products and would even look at VMI for critical products beyond a 72 hour need.
yes, it depends on proximity and variability. Successful inventory management involves creating a purchasing plan to ensure that items are available when they are needed — but that neither too much nor too little is purchased and keeping track of existing inventory and its use. keeping inventory depends upon requirements of customers and companies.
I prefer outcome based contracts to cover such requirements, so a service level agreement and associated KPI for deliveries rather than dictating where inventory should be held.
Time is now changing we need to adopt lean inventory concepts like VMI ( Vendor Manged Inventory ) strategic partnership with key suppliers that shifts the inventory burden on them and are delivered to you when you need them - JIT principles ( Just in Time concepts ) , or if operating on a retail model the most popular is Consignment Stock . In this concept the stock is with the retailer without any inventory burden and is paid when consumed or sold .
If you are left with with SCM equation of closeness to Supplier or customer you need to decide the portion of Value addtion on the Product that take a part of your sale . If the product that you are selling has lot of value addtion ( Value engineering delivered by your organisation wherein the subject inventory is a component ) then it would be better to locate close to supplier , else if it is Customer driven and in order to meet the expectation of the customer you need to have the choice of Regional warehouse or regional stock point which goes in line with customers expectation of zero lead time which is predominantly found in FMCG products
Hi Dave - yes, proximity and variability definitely count. I'd also include systems and tech - if you can see that a supplier has a far superior inventory tracking system to yours, you might as well take advantage of this.