Q&A with John Atkinson, Inventory Management Expert at ACSIM
The Advanced Certificate in Strategic Inventory Management: ACSIM is delivered through Innoverto Training in Dubai and covers Effective Inventory Management which is a vital element of Supply Chain management and effectively underpins both financial revenue streams for the organisation as well as ensuring that projects are completed on time.
ACSIM leads delegates through the key methodologies to ensure that inventory levels are optimised both financially and operationally. The course expands to incorporate safety stock level system management, the management of slow moving and obsolete inventory and provides delegates with a soft copy inventory management model to enable delegates to swiftly and confidently implement their learning upon their return to the workplace.
What do you believe are the key challenges faced by organisations when managing inventory?
From my experience of working globally with a range of clients across all industry sectors including: Oil & Gas, Telecoms, Defence & State Institutions, the most common challenges are:
- Managing Excess Inventory Levels.
- Managing user forecast variations.
- Managing changes in inventory mix as a result of Operational changes.
These challenges can be overcome, by applying various models including: Forrester Analysis, and understanding the key inventory metrics; particularly leading indicators that will provide a “heads up” to inventory mix change. When combined with Stock Turn Ratio analysis, the organisation gains a clear picture of change and is able to adapt by both Re-balancing inventory levels and also adapting the appropriate min/max model.
What are your views on Effective Safety Stock Management?
There are various methods for organisations to manage Safety Stock Levels, including: “Additional percentage to order volumes” Vendor Lead time led initiatives to name but a few. The challenge with these approaches is that they have limited success. For Safety Stock to be effective, Safety Stock Management should be developed in line with overall Risk Assessment & Mitigation, combined with an in depth understanding of the underlying inventory metrics. For example, whilst vendor lead time will provide part of the solution, equally important for Mission Critical Inventory Lines is the ability of the Vendor supply chain to recover from Disasters - whether man made or natural. Very often organisations view this as “Force Majeure” however by understanding the recovery timescale, we are able to ensure zero out of stocks for Mission Critical Inventory Lines. The Key is integrating this risk based approach at the tender stage, for after all, Procurement is the gateway to the Supply Chain.
With regard to Maintenance/Spare Parts Inventory Management, what do you see as the key challenges here?
Whilst this is a challenge across all industry sectors, the common organisational approach is either Finance or Technically driven - manifesting for example as” We need to reduce inventory levels” Or alternatively “Ensure we never run out” These approaches, whilst fulfilling the immediate need, often “cloud” the underlying dynamics of these inventory lines, making strategic analysis more difficult and the goal of optimised cost meeting operational need more elusive to pinpoint and sustain.
Additionally, for certain specialist industries such as the Oil & Gas Sector, Chemical manufacturers and the Defence Sector, maintenance parts often have a “shelf life” of up to 10 years. Here an additional perspective is required, in terms of “Capitalisation” which requires Inventory managers to work closely with colleagues in Finance at a Strategic and Senior level as the outputs will not only impact inventory, but potentially overall taxation burden, asset base and resulting financial ratios.
Solutions also exist in the form of techniques such as “Mean Time Between Failure” (MTBF) which when combined within a model that incorporates vendor lead times, can provide an optimal solution of focused replenishment at optimal cost with minimum inventory holding costs.