Conflicts That Cause Companies to Stockpile SKUs

I am posting this article mostly for my students.  It’s about inventory, folks!

Source: Conflicts That Cause Companies to Stockpile SKUs

How you group items makes a big difference in how you set service levels (fill rates or safety stock levels) in the face of variable demand.  When you have so many SKUs in stock, you have to group them or there’s too fragmented data to get good forecasts.  But how you do that grouping is important for the accuracy of forecasts and order quantities and timing.  And the researchers (graduate students, probably only a few years older than you) found that employees tended over time to misclassify SKUs in the groups, causing errors to creep in.

So the issue is the classic operations management or supply chain management dilemma. We know what to do.  Why aren’t we doing it?  At the end the subject is not about figuring the numbers, it’s about convincing people to do what they ought to.

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