Many of my clients get quite frustrated with their inventory management software – especially the type of software that they use to calculate ‘optimal’ holding levels.
What they tell me is that they typically and frequently get from their software crazy numbers that just don’t make sense. In fact, it seems that in most ERP systems they just turn off this capability.
The cause of this problem is easily explained: it is the difference between logic and reasoning.
You see computers calculate the requirements based on data and formulas using a type of software logic known as an algorithm.
An algorithm is a finite set of instructions performed in a prescribed sequence (Collins English Dictionary).
This approach is necessary for computers to work but unfortunately it also limits the scope of alternatives and issues that the ‘system’ can identify and thus the results can be misleading.
People, on the other hand can be logical, but have the added capacity to apply reasoning to their problem solving.
Reasoning is the ability to make sense of things, to establish and verify facts, to relate one idea or situation to another, and to make appropriate adjustments based on observations and conclusions (J Ferreiros, 2001).
These attributes are a key requirement when determining appropriate stocking levels.
Computers can’t do this, only people can.
Next time you need to determine an appropriate holding level for an inventory item don’t rely solely on a computer or a formula.
There is a high degree of probability that this will lead to inappropriate holdings, a higher risk of downtime, and wasted expense.
Instead, combine this with your own knowledge and reasoning to identify and verify facts, relate one situation to another, ask ‘what if’, and ‘think outside the box’.
You might also be interested in this items relating to inventory management software:
An article titled The Management of Spare Parts Inventory is Different – Here’s 8 Ways
A video on forecasting spare parts requirements
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Posted by: Phillip Slater