Are the inventory buffers in your Supply Chain forward looking?

The purpose of inventory buffers in supply chain is to ensure that we have enough stocks to meet the maximum demand expected till the next consignment arrives. Hence, the buffers must be forward looking, by definition.

However, we have seen several supply chains where buffers are set looking at only the past data. These include actual consumption of buffers and actual times to replenish them. These are backward looking, by design.

Companies working on backward looking buffers often face stockouts whenever there is a major shift in demand patterns. The irony is that many of these shifts are predictable and a significant number are caused by the company’s own planned actions!

If your company’s supply chain faces frequent stockouts, it is prudent to start with investigating the design of inventory buffers.

That’s the heart of a replenishment based supply chain!