World Class Master Scheduling: Best Practices and Lean Six Sigma Continuous Improvement

Chapter 2: Utilizing Inventory Strategy

OVERVIEW

Inventory strategy was introduced in Chapter 1 and will be described in much more detail in this chapter. Inventory strategy is such a key factor that some businesses actually refer to this methodology as their business strategy. Dell, as an example, may fall into that category. Michael Dell, according to some texts, attributes the success of his computer business to the lean supply chain, access to customers, and not carrying inventory. This inventory strategy is not necessarily unique, but it was not common just a few years ago in the mature commodity markets. Most people would consider personal computers to be such a market. In Dell s case, its inventory strategy is assemble to order (ATO). In its planning process, Dell plans for the availability of components at one level down from final assembly. No final configurations are committed to until the customer actually calls with an order. Compare this to other more traditional computer manufacturing where stock might be held at a retail center, such as Best Buy, and another buffer of inventory is held in a warehouse somewhere for the retail draw. As you can see, the latter example, make to stock (MTS), is much more costly. Differences in customer service such as being able to touch and feel the product, some would argue, make a difference. I make no judgment as to customer perceptions on the topic of PCs, but the lessons are easy to understand and apply to any business. The business magic comes from picking...