Why you should be interested in stocks!

A few days ago, I had a conversation with the managing director of a medium-sized company. The focus was on optimizing the supply chain and the potential that can be expected. In this context, we also discussed inventories in the supply chain. My conversation partner states directly: “I’m not interested in stocks!”

I come across this argument surprisingly regularly. The reasons given for this are always along the lines of being able to afford the stocks, that the ability to deliver is crucial and that no bank loans are needed anyway. I always congratulate my interviewees on doing so well, but then point out to them that this attitude can quickly become dangerous for the company.

Inventories are an organizational lubricant that can be used to cover up almost all friction and unreliability in a value chain and in the entire supply chain. All the inefficiencies of a supply chain can be hidden in the sea of stock. That’s why you have to dive into the stocks and see what mess is underneath.

You don’t have to force the stock down to see where it’s cracking. The potential for improvement and optimization can be easily and painlessly identified, quantified and tested in a digital twin of the supply chain.

If the supply chain has become more efficient and effective, you can usually manage with less stock without jeopardizing delivery readiness. Even if you can “afford it”, you should work with the optimum inventory and not indulge in high inventories, because if you operate the supply chain with excessive inventories, you will not be able to prevent inefficiencies from accumulating again under the sea of inventory.

Prof. Dr. Andreas Kemmner

Prof. Dr. Andreas Kemmner

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