Sanpo is an iaidō technique where you have to face several opponents at once. Its effectiveness depends on a comprehensive assessment of the situation and the implementation of several related cuts. Focusing on only one opponent will not allow us to successfully overcome such oppression.
A pandemic is not just a time of turbulence in demand, but also in supply forcing a comprehensive view of the supply chain. The collapse of supply chains has significantly reduced the service levels of suppliers. The use of declarative lead times and the assumption of 100% rill rate proved to be wrong and inadequate to the realities of the “new” economy. Does slow loosening of restrictions allow a return to the application of earlier rules of inventory control?
My experience says that majority of companies prior to the pandemic did not pay attention to tracking Service Level of suppliers, or at did not do this in a systematic and process-oriented manner. The promise of a return to normality may tempt you to maintain this approach, even though it was not good at all. The consequence of adopting a silent assumption of 100% Service Level is that you are exposed to the risk of an out-of-stock situation arising from two problems:
– untimely deliveries
– incomplete deliveries
Knowing the current inventory position as well as the demand forecast and its volatility, we are able to calculate how many days of sale are covered by our stock. Using declarative lead time, we will send the order to the supplier at the latest possible date, which will allow us to receive delivery before falling into an out-of-stock situation. However, if our supplier is notoriously late, we can receive delivery long after our stock reaches 0. The situation is similar in the case of a low fill rate of the supplier. If we track the actual Service Level of suppliers on an ongoing basis, we are able to make decisions regarding the size of orders and the time of their placement, in a way that significantly reduces the risk of out-of-stock phenomena. Monitoring of suppliers service level can be implemented, e.g. by calculating the standard deviation for delivery delays and their incompleteness in the last X months for each product. The calculated values should then be included in the process of order management e.g. by including them in the calculated safety stock levels or by moving the date of sending the order.
Additional information that is also worth considering when placing orders is the non-working days calendar of our supplier. With this knowledge, we are able to accumulate stock in advance for the duration of sales coverage when our supplier is not available.
Learn more about how Smartstock optimizes inventory taking into account Supplier’s Service Level and Supplier’s calendar. Order a demo.
Sanpo technique performed by Takashi Kuroki, the master of our iaidō school is available on https://www.youtube.com/watch?v=XA0EV1UNSX8
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