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Inventory compensates for our agility gap.
Well-run Demand Driven Supply Chains need inventory buffers at select nodes in the network. Inventory has a specific role to play in smooth running of the supply chain. It actually compensates for our lack of agility in synchronizing actual supplies with current demand on a dynamic basis. More agile companies can work with smaller buffers for maintaining the same service level. Every time we improve on agility, we can bring down the inventory buffers or improve service level or both.
An extreme example is the case of power generating companies who don’t have the luxury of working with finished goods inventory. They need highest level of flexibility in their production systems to avoid power cuts and consequent drop in service levels.
Next time you look at inventory in your supply chain, think of the distance we still need to cover in our agility journey.