Member Article

New tool to bring transparency to inventory performance, as more than half of businesses report negative impacts due to inventory levels

• New research reveals that inventory is a strategic priority for most manufacturers, with 77% reporting or planning investments in inventory management capabilities
• Inventory optimization specialist, nVentic, launches  nVstocks Inventory Evaluation to boost inventory performance and to give manufacturers an objective way to know how close to optimal their inventories are

Inventory continues to be a board-level topic in the wake of the COVID crisis and ongoing supply chain issues, with a new survey revealing that senior executives don’t have an objective standard to measure their organisations against when it comes to inventory levels.

That’s according to nVentic, the inventory optimization specialist, which surveyed 250 C-suite executives of large to very large European companies in the manufacturing sector. 

The research revealed that the strategic importance of inventory is recognised at a majority of businesses. Ninety percent of executives report discussing it regularly at board level, 77% have made or are planning investments in their inventory management capabilities, and 74% say they are concerned about the environmental impact of scrapped inventory. On top of this, 69% consider inventory a strategic element of their business that can give them a competitive advantage.

Inventory woes

However, the survey found that there is significant room for improvement. Only 28% report that inventory has not had a negative impact on their business performance over the last three years. 59% report lost sales due to inventory shortages, and 37% regularly scrap more than 5% of inventory each year. In fact, 14% regularly scrap more than 10%.

What is particularly striking in the results is the lack of correlation between perceptions and performance. Despite the lacklustre results reported, a majority believe they have “about the right” levels of inventory.

Matthew Bardell, Managing Director at nVentic, commented: “This might be complacency: writing off 5% of inventory every year and losing sales is ‘good enough’. Or it might be despair: ‘it’s impossible to do any better’. Either way, if the 77% who are investing in their inventory capabilities really want to judge whether those investments pay off, they need to develop a strong and objective way of establishing what good looks like.”

nVstocks Inventory Evaluation

To help companies improve their inventory year on year and take the pain out of inventory analytics, nVentic has launched nVstocks Inventory Evaluation to empower supply chain teams to identify, prioritise, and act on opportunities to avoid shortages and overstocks.

This is the first time nVentic’s proprietary technology is being made available directly to clients in a SaaS format, but it has been helping major manufacturers improve their inventory positions for more than 10 years already. 

The tool provides organisations with an objective assessment of current inventory levels, highlighting item by item where they have too little or too much but in a way that allows users to filter and sort items using a range of criteria, such as shortage risk or reduction potential. The tool calculates optimal levels using established inventory science and presents them in a number of flexible and intuitive formats, along with a simple-to-follow guide. Inventory reductions in the range of 20-50% are typically identified using nVstocks Inventory Evaluation while maintaining or improving high service levels. 

Bardell added: “Developing strong inventory analytics, with the help of tools like nVstocks Inventory Evaluation, should be a high priority to ensure that investments deliver value and that organisations are achieving the fine balance of minimising both shortages and excesses using the best information available.”

For more information and to view the full report, visit the nVentic website.

This was posted in Bdaily's Members' News section by Lucy Jefferson .