Frequently Asked Questions

How can I adjust my inventory to the service levels provided by my suppliers during downturns and upturns?

A Downturn needn’t be all Doom

Maybe you have just got off the phone from your Marketing and Sales Director. You have just been advised that one of your fairly large customers to whom you supply a large volume of OEM parts has cut back dramatically. Unfortunately you reflect that this is the third call of a similar nature in the week. Conditions are tough.

Clearly in situations like this you will need to cut back on your own orders to preserve cashflow, but it need not be all doom and gloom. Your suppliers are experiencing similar problems. Their capacity is freeing up. Where once their lead times were months they might now be days. Plant capacity constraints for them are less of an issue now so they can actually improve their service levels. They can often improve their reliability during tough times as change overs between product runs are easier to do with less pressure on plant utilisation.

Now is the time when it would be nice if you were able to quickly tell your planning and purchasing systems that:

  • Lead times will be shorter, and
  • Supplier reliability is likely to improve, and
  • Your warehouse staff, while you had to cut back a bit, now have more time to manage more frequent receipts, and
  • While credit might be tight, at least the interest rates are coming down, and

… then have the purchase order recommendations and inventory and supply plans adjust accordingly (and easily).

Of course with micq-if you can quite easily adjust the profiles for the overall business climate and for your suppliers to reflect the changed conditions. And then you can get on with managing and rebuilding your business. A downturn can be a time to improve the resilience, capability and competitiveness of your business, by quickly adjusting to the new circumstances.

How to ride the upturn even faster

If upturns are not managed well there can be missed opportunities.

As the recovery starts you will see supplier lead times start to creep out again. There will likely be shortages for some products, and interest rates will start to rise. It will be important to anticipate longer lead times and pressures on suppliers, especially when rebuilding safety stock.

It is too late to order extra safety stock when you are ‘surprised’ by supply problems. Safety stock needs to be ordered in advance. What tools have you got to ensure that you can:

  • track and adjust expected supplier lead times and reliability, and to the level needed?
  • factor in the changed supply conditions so you can ‘stay ahead of the game’?, and
  • tune your service level, profitability and ROA responses to improving conditions.

It will be important to have the supply when you need it. Using micq-if you can manage the emerging issues and opportunities proactively.

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