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3. Implement differentiated inventory policies
Inventory may be the area where supply chain segmentation has been employed most often
in the past five years. Inventory optimization has progressed during that period to become a
process-driven discipline of regularly determining what inventories to carry, where, in what
form, and in what quantities across a multiechelon network. Once again, this starts with the
foundational step of understanding the value propositions offered for each customer/product
intersection. Based on this information, companies use analytic tools to evaluate the entire
network and determine the stocking policies for each product at each stocking location.
This process will include determining how much finished-goods inventory to carry downstream
at regional distribution centers (DCs), upstream at central DCs, and at factory locations. It will
also include deciding where to incorporate postponement strategies by determining how much
inventory to carry in semifinished mode or as components to help offset higher demand
variability or to reduce costs for products that have different service requirements.
Figure 5 shows a simplified example of a company moving away from a one-size-fits-all
fulfillment strategy to multiple strategies for different customer/product profiles. This simple
example illustrates the ability to reduce downstream inventories by serving some
customer/product segments from upstream sources, thus taking advantage of the pooling effect.
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