Inventory Optimization Trends – A Cross-Industry Comparison

How Much Inventory Do We Need to Support the Company’s Assets?

Answering the question of “how much inventory is needed” has become one of the most difficult questions for supply chain leaders to address today. This has become increasingly difficult given the steady demands for capital investments to upgrade and maintain infrastructure and to address increasingly stringent regulatory requirements.

ScottMadden, Inc., and Oniqua, a leading provider of analytics-based optimization solutions for asset-intensive organizations, partnered to conduct a global, cross-industry inventory management and optimization benchmark study on behalf of the Utility Materials Management Benchmarking Consortium (UMMBC).

The UMMBC, a consortium comprising many of the largest utilities in North America, develops information needed to examine and improve ongoing warehouse and inventory management operations. The consortium, coordinated by ScottMadden, prepares an annual survey on a topic that has the most value for consortium members. Regarding the value of UMMBC surveys, a senior supply chain manager and UMMBC member from a Fortune 500 energy company recently commented, “The UMMBC’s survey reports have been very helpful in providing our company with relevant, unique benchmarking information.”

This year’s topic of choice examined the state of inventory management and optimization within utilities and across other asset-intensive industries, including oil and gas and mining. Specifically, the study explored the following items:

  • Inventory visibility levels and segmentation approaches
  • Stocking level criteria assignment practices
  • Safety stock level determination
  • Inventory optimization measures currently in use
  • Types of tools used for inventory optimization
  • Current integration practices between materials management systems and asset management systems

InsightImage_InventoryOptimization1

While the results demonstrated similarities among the four industries (e.g., most companies, regardless of industry, assign responsibility for inventory optimization to individuals or groups within separate business units), the mining industry scored highest in inventory efficiency and effectiveness measures. Additionally, mining companies showed the highest adoption of advanced statistical models.

InsightImage_InventoryOptimization2

Access Your Copy of a High-Level Summary of the Inventory Optimization Study

Please click here to access a complimentary summary of the study presented at the 2013 Utility Purchasing Management Group’s (UPMG) annual conference in Austin, Texas.

To submit a request to receive the full study results, please contact us.

ScottMadden Supply Chain Support

ScottMadden’s long history of working with electric utilities and other asset-intensive companies and deep understanding of the key performance levers in supply chain gives us a clear lens through which to view efficiency and effectiveness. Additionally, ScottMadden’s proven methodology to uncover the true drivers of inventory levels and develop realistic improvement plans is the most comprehensive approach in the industry. We encourage you to learn more about our capabilities and opportunities to optimize your inventory levels.

To learn more about ScottMadden’s supply chain practice, please contact us.

View More

Contributing Authors

Welcome to ScottMadden!

Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.