How to Have a Serious Conversation About Inventory

Whether you are a manufacturer, retailer or distributor, inventory is likely one of your largest assets – after cash, of course. Managing this asset takes a cross-functional team, all (hopefully) moving in the same direction. Weak management of the inventory process results in a porous supply chain. Service levels are not met, customers have poor experiences and competitive pressures increase. This requires basic inventory management – ensuring the right item is on hand at the right time.

But there is a softer dimension to inventory management that lurks in the background – the eye of the executive suite. The supply chain has increasingly become a strategic objective for senior leadership and their focus extends beyond keeping the shelves stocked. They are concerned about shareholder value, sustainability and innovation. Much of what drives investment in supply chain transformation today comes from the expectations of the executive suite.

Arkieva has written extensively on the subjects of inventory optimization and sustainability. This blog will focus on how to “work the room” and facilitate constructive interoffice communications to move forward as a cohesive team.

Aligning the vision of those with immediate deliverables and those tasked with longer-term deliverables is always a priority. Consider a chef interested in making a single, perfect omelet regardless of the number of tries (and eggs) it takes, and a chicken supplier whose birds can only lay a certain number of eggs a day. Something must give if you need to make 30 omelets every day. So, what do you do? Sacrifice quality (service levels), revenue (sourcing more eggs/reduction in sustainability), or customer experience? Lack of alignment causes ripples throughout the organization that are hard to recover from.

A good starting point for alignment is to play out a variety of scenarios that will help the team understand the trade-offs between forecast accuracy, and service and investment. Get the team to align on the most preferred scenario. Make this option a single strategic objective for everyone. Certainly, you can add sub-goals, but having a common goal is essential to success.

But having agreed to strategic objectives is not enough. You must also agree on success metrics. How much savings, service level increases, reduction in waste, etc., is enough to say the initiative was a success? How much can you test at the same time? What exactly does sustainability look like for your organization? You may also need to align these success metrics with an individual’s personal success metrics. This can be the trickiest part of defining success.

For example, in a previous organization I worked with, we built a predictive model that would bring on board the most profitable customers while reducing spending to acquire by 20% and reducing unprofitable customers by 7%. However, the senior sponsor of the project was not concerned about profitable customers because their bonus compensation was tied to net-new accounts, not account profitability. This created a disconnect in success definition and almost doomed the project. It took several executive-level meetings to arrive at an acceptable outcome to move forward with a simple test to prove the initial investment in the modeling we built.

And this brings the concept of “team” back to the top of the conversation. Some project leaders have the inclination to keep projects close to the vest. They include only those who need to know in the loop on actual tasks and inform others with semi-regular status reports – this is not a good approach.

Here is another example from my past experiences in marketing. About 15 years ago, I was involved in a rebranding project for an insurance company. We updated everything from messaging and the web to our claims adjuster vans. All to provide a cohesive image for the company. We were proud of our work and eagerly shared it with the company. That is when “stuff” hit the fan.

It turns out our claims adjustors were not happy to have their “crash busters” vans wrapped in promotional materials. One of their perks was a company vehicle for personal as well as business use. They were embarrassed to bring these “rolling ads” to the weekend soccer fields. Did we think to consult with them? No, we did not. The outcome was a more conservative design for these vehicles – which we, as the agency, had to cover.

Now how someone feels about what their “free car” looks like may not be the most significant obstacle to the adoption of a brand, but it does underscore an important point. When you do your R.A.C.I. chart for your project, overemphasize the “C” (consult) over the “I” (inform) particularly in the formative stages of the project. Focus on adoption and outcomes and over-communicate. Seek out points of view of individuals that are not actively leading the project but are impacted by your decisions. It will make a big difference in the end in terms of both adoption and success.