Wednesday, April 19, 2006

Inventory Management - Part II

In my previous post on this topic we talked about using POS data to align inventory with sales.

This project combined a few innovative techniques

1. POS data -- while available many companies don't use it for some reason (old concerns about data quality seem to be the biggest issue) -- they are missing a huge opportunity to shift their companies mindset from "sell-to" to "sell-thru" - it is only the purchases by the ultimate customer that matter, the rest of the PO is just a markdown or return waiting to happen.

2. VMI - Vendor managed inventory - again this has been around for awhile but not used much in the CE/CPG space with retailers. However VMI is a better method as it aligns incentives better for both the retailer and manufacturer. Topic for another post but if you examine the financials on both retailer and manufacturer and understand their problems, you will see that VMI will produce superior returns for both parties. It does however require a higher trust level.

3. Planning as a Service "PaaS" -- Something software companies and their customers should start to consider. Similar to the more common Software as a Service (SaaS), PaaS removes the need to have Supply Chain (or even technical) experts in a CE/CPG product company. (SaaS removes the requirement to have technical experts supporting it, at least for that application)

Many companies are focused on making superior product rather than on building superior technical or supply chain expertise. These companies argue that technology or supply chain is not strategic and is a candidate for outsourcing to experts.

PaaS also aligns incentives better between the software tool vendor and the manufacturer. If the software vendors tools are so great (deliver so much value) then show me! PaaS allows the best software vendors to deliver just results every week -- then the client can decide
1. if they want just have the results or
2. bring the business process in house, and still have technolgy outsourced - a SaaS model
3. or everything in house - traditional software deployment.

Again like the VMI between the retailer and manufacturer this requires a high level of trust. So far for our clients that are using PaaS, it seems to work well.

15 minutes of fame

Vinnie invited me to blog over on deal architect. For those of you who haven't read his blog, you will find a real treat -- he always has something interesting to say. His blog and a few others remind me of the "good old days" of USENET with the level of conversation.

Hopefully I've kept up his usual standards...