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2013/05/24

Optimising Inventory in the face of Climate Change…

Optimising Inventory in the face of Climate change

By Howard Roddie, Senior Supply Chain Consultant (@HowardRoddie)

With extreme climatic events becoming ever more frequent and rising temperatures looming, it is becoming increasingly clear that today’s global supply chains can
no longer ignore the climate change threat.  Within the UK in 2012, Defra released a Climate Change Risk Assessment (CCRA) stating that extreme climatic events such as flooding pose a key risk to supply chains both nationally and globally.  Despite this, very few businesses deem climate change as a real material risk.  Businesses are already facing the challenge of optimising inventory, delivering high customer service and lowering operational costs without the added pressure of climate change, but this only emphasises why a holistic approach is needed now more than ever before.

Advanced Multi-Echelon Inventory Optimisation (AMEIO) enables the reduction in supply chain risk as it not only looks at inventory echelons holistically, but also has the decision support capability to introduce new routes, inventory points and production resources.  In the case of an extreme climatic event, the uncertainty surrounding the availability and location of resources can lead to a rise in transport and supply costs; indeed, as these events have become increasingly frequent over the last fifty years, the importance of scenario planning has become all the more vital.

AMEIO combats these issues as it not only allows you to consider tactical and strategic level plans but also the impact upon echelons and inventory up and down the supply chain.  This holistic approach to planning and inventory optimisation means you avoid the pitfalls of looking at issues in isolation.  The focus moves from the single issue to the relationship between issues.  As this understanding grows, the quality of decision making improves, especially where the interface between the user and the software is intuitive and using AMEIO not only allows this valuable insight but also achieves:

  • Visibility up and down the supply chain
  • A decrease in redundant safety stock
  • Fewer end customer service failures
  • Improved external supplier performance due to better timed and more accurate demand forecasts

As supply chains globally become more complex and climate change impacts continue to grow in frequency, advanced solutions such as AMEIO will be essential in providing optimisation in the face of climate change challenges.  They may well point the way to leaner, less complex supply alternatives and when you look at your current solution mapped out in detail, you might just start to wonder how you got there…

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