Recently I visited a company located near Hobart, in Tasmania. Hobart is the southern most capital city in Australia and possibly the world.
One of the interesting things about Hobart (from a spare parts inventory perspective) is that it is a long way away from many industrial centres that supply spare parts.
For example, Hobart is more than 16,000 kms (10,000 miles) from Germany. This means that the people there have learnt how to manage their inventory with long supply chains.
It might be a surprise to hear that this does not necessarily translate into more inventory!
Quite coincidentally, I recently conducted some research on the impact of long supply chains by reviewing 33 warehouses spread across North America, South East Asia and parts of Africa.
Using this data I wanted to understand and document whether location was such a sufficiently overriding issue that it explained the variations in holding levels across these regions and between the individual locations. Interestingly, the answer was both yes and no.
Yes, there were marked differences between regions and no, the location did not explain the differences.
As part of the review I looked at the stock turns at each location but also interviewed local management in each region and, as you can imagine, there were wide variations in the local approach and attitude towards inventory management.
These ranged from great care and attention to ‘not our problem’.
Those sites that had a greater ‘care factor’ with respect to inventory levels were also clearly the best performers in terms of actual stock turn outcomes.
Our conclusion, based on these interviews, was that it was the approach of site management that made the difference.
This then is the truth about long supply chains: of course they have an impact on stock holdings, however, the attitude and approach of local management has a far greater impact.
Our review provides an objective basis on which to refute any claims that reduced inventory performance is entirely due to long supply chains. This claim has just not held up.
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Posted by: Phillip Slater