Oct 5, 2006 0
In Part 1 of Creating Supply Chain Value w Cycle Time Inventory Yield, I looked into what I considered an excellent piece by Thomas Craig concerning what he identified as key drivers in a Supply Chain – Cycle times and Inventory yield management. In this concluding part, I want to explore the specifics of both Cycle time and Inventory yield management.
As introduced in the earlier post, cycle time is,
This cycle time is total inventory days in the supply chain; and it is consistent with the length and definition of a supply chain. The supply chain cycle time runs from the purchase order placed on suppliers through to final placement on the store shelf or floor or to the customer’s warehouse.
and Inventory yield management refers to,
Yield management is applicable in supply chain management when inventory is viewed as the supply whose yield is to be maximized.
If one is familiar with lean thinking, then the importance of time within the supply chain shouldn’t be a surprise to you. Thomas’s implication when it comes to cycle time within a supply chain context seems to be centered around inventory cycle time i.e understanding the end to end inventory transformation across the supply chain that is under a firm’s control. In part that is driven by the need to recognize that quite a significant portion of the firm’s capital is tied up in inventory whether it is known or unknown. He says,
Studies have shown that manufacturers and wholesalers have over 60 days of inventory and that retailers have over 90 days of inventory capital tied up. These times do not include the entire inbound inventory in the supply chain. Real supply chain inventory is likely 25% higher.