From Supply Chain Management Review
Inventory is a universal headache at most companies – with the potential for significant impacts, both good and bad. Too little inventory puts sales revenue at risk. Yet, having too much inventory sitting around increases costs. And, for inventory planners, getting it wrong can be a career-ending move. Through a unique project with Intel, my colleagues and I built a tool to help companies get inventory right.
Through its deployment, Intel transformed inventory management into a fully automated “lights-out” process that generates inventory targets that planners accept more than 99.5% of the time. It’s also reduced the time required to commit to customer orders from months to one day and generated over $1.3 billion in increased gross profits since 2014.
Our engagement began as a research project in 2005 that was designed to help Intel improve its forecasting and inventory processes in one division. The 9 years between the launch of the research project and the beginning of a payback period may seem like a long time. The short answer is that the math had to catch up to its use in the field; then, once we began to deploy it, we made refinements to the tool before it began to deliver results. When I present this research along with Matthew Manary, who was then at Intel, we joke that practitioners can’t believe we did the project across an organization as large as Intel in just 9 years; my academic colleagues wonder what took us so long.