Do you consider distribution and inventory costs when you design products? Can you keep your customers informed of when their orders will arrive? Do you know what kind of inventory-control systems your dealers use? If not, you’ve succumbed to the pitfalls of inventory management. You’re not alone. Manufacturers have been concentrating on quality of incoming materials and outgoing products, but they haven’t been paying as much attention to the costs associated with transporting and storing them. Lee and Billington describe fourteen pitfalls of supply-chain management and some corresponding opportunities. The more complex your network of suppliers, manufacturers and distributors, the more likely you can gain operational efficiencies by attending to inventory.
1. For a thorough discussion of customer service measures, see M.A. Cohen and H.L. Lee, “Out of Touch with Customer Needs? Spare Parts and After Sales Service,” Sloan Management Review, Winter 1990, pp. 55–66.
2. For a more thorough discussion of the problems of ABC classification, see: M.A. Cohen and R. Ernst, “Multi-Item Classification and Generic Inventory Control Policies,” Production and Inventory Management Journal 29 (1988): 6–8; and
R. Ernst and M.A. Cohen, “Operations Related Groups: A Clustering Procedure for Production and Inventory Systems,” Journal of Operations Management 9 (1989): 81–104.
3. M.A. Cohen and H.L. Lee, “Resource Deployment Analysis of Global Manufacturing and Distribution Network,” Journal of Manufacturing and Operations Management 2 (1989): 81–104.
4. S. Nahmias, Production and Operations Analysis (Homewood, Illinois: Irwin, 1989).
5. See D.E. Whitney, “Manufacturing by Design,” Harvard Business Review, July–August 1988, pp. 83–91;
J.W. Dean, Jr., and G.I. Susman, “Organizing for Manufacturable Design,” Harvard Business Review, January–February 1989, pp. 28–36; and
C. Taguchi and D. Clausing, “Robust Quality,” Harvard Business Review, January–February 1990, pp. 65–75.
6. See L.B. Schwarz, ed., Multilevel Production/Inventory Control Systems: Theory and Practice (Amsterdam: North Holland Publishing, 1981);
M.A. Cohen and H.L. Lee, “Strategic Analysis of Integrated Production-Distribution Systems: Models and Methods,” Operations Research 36 (1988): 216–228; and
A. Federgruen, “Methodologies for the Evaluation and Control of Large Scale Production/Distribution Systems under Uncertainty,” in Logistics: Where Ends Have to Meet, ed. C.F.H. van Rijn (Elmsford, New York: Pergamon Press, 1989), pp. 143–157.
7. B.S. Moskal, “Logistics Gets Some Respect,” Industry Week, 18 June 1990, pp. 14–22.
The authors gratefully acknowledge helpful comments from Tom Davis and Warren Hausman on an earlier draft of this paper.