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How frequently should we resize the Supply Chain inventory buffers?
Frequency of resizing various inventory buffers in the supply chain is a critical parameter which decides how responsive we are in meeting consumer demand in a volatile demand environment.
On the one hand, supply chain professionals often complain that buffers are not responsive enough to marketplace changes, leading to stockouts and inventory pile ups from time to time. On the other hand, they resist frequent changes saying that supplies are unable to cope up with the buffer revisions. Where is the sweet spot?
Theoretically, we should revise the buffers whenever new data about market demand indicates a shift in the demand pattern at the granular level. This requires high level of flexibility and responsiveness on the supply side. We should develop this capability on an ongoing basis.
If the current supply scenario is less flexible with latency in supply actions, we need to acknowledge the gap in current capability and settle for a lower frequency. This would, however, mean that we live with certain stockouts and inventory pile ups from time to time.