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take-time-and-cost-out-of-your-inventory-and-supply-chainWhy is it that distributors rarely see forecast accuracy rates over 70% or 80%? More importantly, why are they satisfied with incremental improvement? It’s time for the chains to come off.

A recent article in Industrial Supply Magazine suggests that lean manufacturing offers a lot of supply chain management best practices which distribution companies can learn from. The main lesson? You can have the best of both worlds – lean inventory and great customer experience.

TCO Trade-Off Point

Lean distribution finds the perfect trade-off point by taking a total cost of ownership approach, according to the article’s author, Howard Coleman, Principal, MCA Associates, Management Consulting & Thought-Leadership.

A lean supply chain management strategy abandons old-school “push-based” forecasting, which operates on optimizing old rules. Push forecasting merely pushes product for downstream consumption without looking at the inventory trade-offs like transportation costs and supplier constraints. It makes excuses for safety stock as a casualty of doing business.

Lean Pull-Based Planning & Execution

On the other hand, lean Pull-Based Demand Planning brings the concept of “total cost of ownership” to the forefront:

“Start with a forecast, particularly for longer-term and overall business planning, but be wise about committing to strategic inventory positioning and replenishment, recognizing the inherent inaccuracy of forecasts and the diminishing returns of spending more time and dollars on it just for some small incremental improvement. Use pull-based replenishment execution to exploit the constraint!”

This type of lean thinking can do the same in distribution and supply chain management! In reality, only the terminology is different in distribution; order quantities and replenishment frequency interval now replace what manufacturers call batch sizes and production cycle times, respectively.

More About Supply Chain Management Best Practices

Check out the full article now: Take Time and Cost Out of Your Inventory and Supply Chain”

Related: Learn how Supply Chain Planning solutions improve forecast accuracy and reduce total cost of ownership: