The key to lower inventory is
managing planning psychology
Failing to control the psychological aspects of planning is why companies rarely reach desired inventory levels despite significant investments in IT and consultancy projects.
Investments in planning systems is often shading for a vital and more important area. Managing planning behavior. We frequently see companies who have received bad advice from well-intended consultants only to realize that psychological mechanism in planning eat advanced systems for breakfast, lunch and dinner.
Fear is a significant cost driver
Few companies control it
Most companies accept a certain level of stock-out to keep working capital at reasonable levels. Still, going stock-out is not pleasant if you work in operations. Depending on mindset some planners see stock-out as planning failure, others have harsh memories of a calls from the Sales director. Most try to avoid it.
Having too much inventory is less nerve-wracking. Finance will no doubt raise eyebrows but nothing like the emotional impact from stocking out. The imbalance between the personal impact of over- and understocking is the reason why inventory planning decisions must be controlled and challenged with high frequency.
Stock controlling is a service build for setting the right stock levels and controlling planning behavior that work against targets.