What’s the Word: the Language of Logistics
To load balance inventory means to distribute inventory across a network of warehouses with the main purpose of positioning inventory closer to the end customer prior to purchase.
Retailers load balance inventory to reduce last-mile costs and ensure faster delivery. When leveraging a well-balanced network, it also allows for redundancy in their supply chain.
Merchants can outsource their fulfillment to a logistics partner that will load balance their inventory and fulfill both B2B and B2C omnichannel orders.
JIT vs. MRP vs. EOQ
These inventory management techniques are commonly used and selected based on a company’s manufacturing operation and product mix:
Just-In-Time Management (JIT), also known as the Toyota Production System (TPS), was developed by the Toyota Motor Corporation in the 1970s.
JIT allows companies to reduce the costs associated with storing and wasting excess inventory by putting processes in place to ensure that goods are received as close as possible to when they are actually needed for manufacturing.
This management process requires that goods are received and delivered accurately and precisely. Any miscalculation can have a ripple effect throughout the supply chain. For instance, a critical part or component that does not reach the manufacturer “just in time” can result in delays and losses.
Materials Requirement Planning (MRP). The MRP inventory management method is a sales-forecast-dependent technique; the manufacturer must have precise data regarding sales records and predictions to facilitate accurate planning.
For example, an automobile manufacturer using the MRP system ensures that parts required for assembling cars are kept in stock based on forecasted sales demand. Inaccurate sales predictions can lead to erroneous inventory planning and can result in an inability to meet customer demands.
Economic Order Quantity (EOQ). EOQ management systems calculate the
number of supplies a company should add to its current inventory with each batch order. Companies that use the EOQ system try to forecast consumer demand while also holding an existing inventory of supplies.
EOQ aims to ensure the inventory is optimized per batch order, which minimizes the frequency of orders and the probability of over- or under-stocking.
Sustainability: Coming to Terms
1. Sustainable business model. A business model that prioritizes sustainability, assesses and addresses the enterprise’s environmental impacts, is profitable, transparent, and supports social causes.
2. Sustainable supply chain. Each link in the chain from point A to point B produces the most negligible environmental impacts possible.
3. Carbon offset. To offset their greenhouse gas emissions, some organizations invest in reforestation or land reclamation.
4. Carbon sequestration. Capturing and storing atmospheric carbon dioxide. It is one method of reducing the amount of carbon dioxide in the atmosphere to reduce climate change.
5. Circular economy. In a traditional economy, we make a product, use it, and then dispose of it. In a circular economy, we make a product, use it, and then reuse it or its components.
6. Conscious consumption. Consumers practice conscious consumption by purchasing only recycled products or buying from companies with green and sustainable business practices.
Vice President, Marketing
Supply Chain Optionality
How a company deliberately and surgically eliminates single points of failure by building redundancies in its supply base, internal manufacturing and distribution facilities, transportation modes, and routes to market.
By creating optionality, companies ensure business continuity and product availability despite disruptions. With optionality, powered by technologies like digital twins and artificial intelligence, organizations reduce risk and improve resilience by testing scenarios and evaluating the impacts of their decisions.
—Dr. Madhav Durbha, VP, Supply Chain Strategy, Coupa