How Inventory Decisions Affect Other Areas of the Supply Chain – materials handling | push and pull | bullwhip
How Inventory Decisions Affect Other Areas of the Supply Chain
Inventory decisions have a direct impact on the supply chain, not just in the direct effects, but also in the responses and consequences later on. Understand how inventory decisions affect the bullwhip effect, inventory positioning, and packaging and materials are each affected by inventory decisions.
You recently took over the logistics operations for a widget manufacturer with a complex supply chain. You, on the other hand, are dedicated to ensuring that your company’s logistics are as well-managed as possible. You understand the importance of keeping costs low while maintaining a logistical flow to ensure that managers have the resources they need and customers have the goods they need. You want to know what you can do to improve your inventory. As a result, you begin to analyze your supply chain in terms of how inventory decisions impact bottom operations. To that reason, you’ll focus on 3 key areas: the bullwhip effect, inventory positioning along the supply chain, and the overall impact of transportation, packaging, and material handling on the whole organization.
To begin with, you’re curious about the bullwhip effect, or how minor fluctuations can easily lead into much greater problem. much like a bullwhip effect. Almost as soon as plans are created to deal with the inconsistency, the conditions return to normal, and the plans themselves become inconsistent. In other words, a mistake or mistreatment at any point along the supply chain has the potential to snowball effect into something much bigger issues.
Consider the following example. Assume you were a day late in delivering a shipment to a factory. Due to the fact, workers must postpone today’s work until tomorrow and then complete tomorrow’s job alongside today’s, their manufacturing is delayed by one day. Your transportation team is unable to deliver the goods to the distribution Centre. Your goods are just sitting in the inventory. Because your initial delivery was a day late, more and more time delays are built into the plan. In the end, just single mistake could put you a week or more behind schedule on your operations. The bigger the fluctuation increases as you go further away from the incident, you can see the greater issues it becomes.
Much of this can be avoided if you are careful plan with your inventory positioning and ensure that you have enough goods for each stages of the supply chain.
You should also think about the type of supply chain you have. In a “push” supply chain, where product are created with the expectation of being sold, a minimal inventory level should be consider in this method. After all, A “push” supply chains, work best with businesses that can consistently create items that everyone requires, whereas pull supply chains exist when goods are only produced after a consumer has placed an order. which means that stocking the “pull” supply chain for a custom item is difficult.
Instead, looking into transportation and logistics issues become much more practical.
Even transportation, packaging, and materials can have an impact on the supply chain, especially in pull supply chains but also in push supply chains. As a general rule, “be prepared” is more relevant here before the bullwhip effect was triggered by transportation being late, as you may know. Unreliable transportation may cause chaos across the supply chain, slowing production and causing lost sales. However, transportation isn’t the only issue. Packaging can also be another issues.
Still, it’s not only about having the right transportation and packing.
It’s also about being able to properly handle the materials. So every part cause a consequences later on, be prepare and be alert in every part of your inventory position is much more important. So you could get prepare before it cause into something much bigger issues.