Introduction

Tactical supply chain decisions focus on adopting measures that will produce cost benefits for a
company. Tactical decisions are made within the constraints of the overarching strategic supply
chain decisions made by company management.
The strategic supply chain decisions cover the breadth of the supply chain for the entire
company. Tactical supply chain decisions take the strategic message and focus on creating real
benefits for the company. These can include tactical decisions in manufacturing, logistics,
suppliers and product development.
Manufacturing
Strategic decisions may be made by company executives about the number and location of
manufacturing sites to be operated. However, it is at a tactical level that decisions are made on
how to produce the products are the lowest cost. Tactical decisions may be made as to the
adoption of manufacturing methodologies such as kanban or just-in-time. Tactical decisions may
be required at a regional level by using technology that is available that reduces material
wastage, but cannot be exported to other manufacturing plants.
Logistics
Although strategic company decisions may require an in-house logistics function to be
operational, a tactical decision may be required to use a third party logistics company in a region
or country where transportation costs are high and cost benefits can be achieved by outsourcing.
Similarly in countries where land costs are high, construction of warehousing facilities may be
cost prohibitive and despite not following the strategic vision, a tactical decision is made to use
public warehousing.
Suppliers
Many companies recognize the cost benefits of using global suppliers and adopt strategic supply
chain policies to take advantage. At a tactical level, management has to work within strategic
guidelines to identify and negotiate the terms that will realize the greatest cost benefit across the
company.
Product Development
Companies make strategic decisions on the product lines they are committed to producing.
Tactical decisions have to be made as to the particular products that should be developed. If a
company makes a strategic decision to introduce a new line of MP3 players in Europe, the
company has to make tactical decisions regarding the specifications of the players, what
countries they will be sold in and the market segment they will targeted at where the most profit
can be achieved.
The Role of Inventory in Supply Chain Management
Managing customer and vendor relationships is a critical aspect of managing supply chains. In
many cases, the collaborative relationship concept has been considered the essence of supply
chain management. However, a closer examination of supply chain relationships, particularly
those involving product flows, reveals that the heart of these relationships is inventory movement
and storage. Much of the activity involved in managing relationships is based on the purchase,
transfer, or management of inventory. As such, inventory plays a critical role in supply chains
because it is a salient focus of supply chains.
Perhaps the most fundamental role that inventory plays in supply chains is that of facilitating the
balancing of demand and supply. To effectively manage the forward and reverse flows in the
supply chain, firms have to deal with upstream supplier exchanges and downstream customer
demands. This puts an organization in the position of trying to strike a balance between fulfilling
the demands of customers, which is often difficult to forecast with precision or accuracy, and
maintaining adequate supply of materials and goods. This balance is often achieved through
inventory.
For example, a growing trend is the implementation of sales and operations planning (S&OP)
processes.
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The fundamental purpose of S&OP is to bring the demand management functions of
the firm (for example, sales forecasting, marketing) together with the operations functions of the
firm (for example, manufacturing, supply chain, logistics, procurement) and level strategic plans.
This often involves extensive discussions about the firms on-hand inventory, in-transit
inventory, and work-in-process. Such discussions allow the sales and marketing group to
adequately plan for the forthcoming time horizon by gaining a realistic picture of the inventory
levels available for sale. Additionally, the operations groups are able to get updated and direct
sales forecasting information, which can assist in planning for future inventory needs. Such
information may very well result in shifts in manufacturing plans or alterations to procurement
needs because of the strategic decision to focus on specific units of inventory instead of others in
the near future.
Another example of balancing through inventory is the use of point-of-sale
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(POS) data for
perpetual inventory management in the retail industry. For many retailers, every beep of a cash
register upon scanning of an items bar code during checkout triggers a series of messages that
another unit of inventory has been sold. This information is not only tracked by the retailer but is
also shared with upstream vendors. As items are depleted from inventory, in some cases, both the
retailer and vendor work collaboratively to determine when reordering is necessary to replenish
the depleted inventory, especially at the distribution center level. This is a balancing of supply
and demand because demand information is tracked to determine when to best place
replenishment orders based on the time required to get the inventory to the store location. In
essence, inventory decisions are used to effectively time when supply inflows are needed to
handle demand outflows
INTEGRATED SUPPLY CHAIN AND INVENTORY MANAGEMENT

Integrated supply chain require that each segment of the supply chain i.e., procurement,
production and distribution as shown in Figure 3 be functionally integrated for optimum result.
Today's technology is the key that allows the supply chain to become integrated and therefore
reduces the inventory requirement. Some examples are the electronic transmission of advance
ship notices (ASN) to advise customers of the contents of a shipment and its expected delivery
date. The transmission of purchase orders via electronic data interchange (EDI) can provide more
timely and accurate data to suppliers, allowing for more efficient information in management and
production planning (Kilty, 2000). Also, freight tracking systems now are being used in the
management of the movement of goods, which provides flexibility that can be used to react to
rapidly changing internal and external needs such as changes in production schedule or changes
in customer product delivery requirements.

[FIGURE 3 OMITTED]

It is important that companies develop a supply chain management strategy that is consistent
with their overall business strategy. A key tool to achieving this is to develop a supply chain
"diagnostic method" that can be used to improve operations and reduce inventories (see Kilty,
2000). The first consideration here is for the company to examine and understand their supply
and demand planning. This is the key to optimizing resources as well as the timing of activities
associated with procuring raw materials and producing and distributing products. The next step is
to begin the process of transitioning from a functional organization to a process organization.
And finally, as companies reorganize to be process driven, then the performance measures for
the various functional departments should be changed to support the overall supply chain
management goals. Some examples of the measurements would include perfect order fulfillment,
customer satisfaction, product quality, total supply chain cost, inventory days supply, and cash-
to-cash cycle time.

The process described above will not achieve optimum result desired by supply chain if each
subsystem works independently. To eliminate wasteful and expensive inventory, supply chain
needs to be integrated as illustrated in the integrated model (Figure 3) below. As put by Shapiro
(2001), supply chain refers to integrated planning. First, it is concerned with functional
integration of purchasing, manufacturing, transportation, and warehousing activities. It also
refers to spatial integration of these activities across geographically dispersed vendors, facilities,
and markets. And finally, it refers to inter-temporal integration of these activities over strategic,
tactical, and operational planning horizon. In the study by Porter (1985), it is pointed out that
effective linkage (integration) among activities (or subsystems) in company's can lead to
competitive advantage in two ways: (1) optimization, and (2) coordination. This proposes that a
firm must optimize linkages in a way to reflect its competitive advantage. It also reinforces that
the ability to coordinate linkages is significant to reducing costs or enhances differentiation.
Advances in information technology (IT) have helped facilitated the developments in integrated
supply chain planning and management.

A major goal of the integrated supply chain is the coordination of the logistics, distribution and
production, and production management in a direction that will optimize the value chain of the
company and help to minimize transaction costs and inventory sock keeping unit (SKU) level.
Conventionally, we know that a company may hold inventories of raw materials, parts, work-in-
progress, or finished products either to hedge against the uncertainties of supply and demand or
to take advantage of economies of scale associated with manufacturing or acquiring products in
large batches. Similarly, inventories are considered essential to build up reserve for seasonal
demands or promotional sales (Shapiro, 2001). However, with the new reengineering in
management and companies not just adopting just-in-time inventory practices but engaging in
more integrated supply chain management, attention has recently been more focused on creating
processes that reduce or eliminate inventories, mainly by reducing or eliminating uncertainties
that make them necessary. These efforts have been motivated in part by the recognition that
metrics describing the performance of a company's inventory management practices can be
important signals to shareholders regarding the efficiency of the company's operations and hence
its profitability.

The maintenance of lower transaction costs and optimum inventory control management is not
without some costs and tradeoff. Past experiences have shown that managing inventory
effectively in our economy and the business environment is often difficult. For example, in 1993,
Dell Computer's stock plunged after the company predicted a loss. Dell acknowledged that the
company was sharply off in its forecast of demand, resulting in inventory write-downs. Also, in
1993, Liz Claiborne experiences an unexpected earnings decline as a consequence of higher-
than-anticipated excess inventories. And in 1994, IBM struggled with shortages in the ThinkPad
line due to ineffective inventory management (Simchi-Levi et al., 2000). In recognition of these
difficulties and the urgency to pursue effective integrated supply chain management, Barsky and
Ellinger (2001) pointed out that to generate lower levels of inventory and fewer stock-outs for
customers, suppliers and manufacturers may have to hold significantly more inventory and
expend considerably more staff time to administer the program effectively.
The tactical supply chain decisions that a company makes are not made in isolation but within
the framework of the strategic supply chain decisions made at a global level, which in turn are
based on the global objectives of the company.
BASIS:
Inventory
In order to produce product and get things moving towards production, there are many required
component. From these, one stands out in mind: inventory. If you dont have a grip on your
inventory, you need to revisit your supply chain management basic practices.
Now, when I say inventory, I dont just mean the present amount to make one product or even a
few down the line; Im talking about a consistent set of inventory tactics. These range from
making decisions on quantity, quality, where you need that inventory and how youre going to
get it there.
Also, dont forget timing if you have a limited timeline to get inventory or build your product,
you better be sure you have your supply chain management ducks in a row.
Customer impact
Why are you in business? Its because you give your customers what they want, right? Imagine if
you didnt know what your customers wanted or what their buying habits were you would
probably be in trouble.
Another key factor in supply chain management solution is keeping a tight focus on your
customers and giving them what they want. If you dont, all the tactical thinking in the world
wont give you the right answers.
Remember, the customer is the first focus, and then go on to the other building blocks to
effective supply chain management.

The Role of Inventory in Supply Chain
Inventory exist s in the supply chain because of a mismatch between supply and demand. This
mismatch is intentional at a steel manufacturer where it is economical to manufacture in large
lots that are then stored for future sales. The mismatch is also intentional at a retail store where
inventory is held in anticipation of future demand. An important role that inventory plays in the
supply chain is to increase the amount of demand that can be satisfied by having product ready
and available when the customer wants it. Another significant role inventory plays is to reduce
cost by exploiting any economics of scale that may exist during both production and distribution.
Inventory is spread throughout the supply chain from raw materials to work in process to
finished goods those suppliers, manufacturers, distributors, and retailers hold. Inventory is a
major source of cost in a supply chain and it has a huge impact on responsiveness. If we think of
the responsiveness spectrum, the location and quantity of inventory can move the supply chain
from one end of the spectrum to the other. For example, an apparel supply chain with high
inventory levels at the retail stage has a high level of responsiveness because a customer can
walk into a store and walk out with the shirt they were looking for. In contrast, an apparel supply
chain with little inventory would be very unresponsive. A customer wanting a shirt would have
to order it and wait several weeks or even months for it to be manufactured, depending on how
little inventory existed in the supply chain.
Inventory also has a significant impact on the material flow time in a supply chain. Material flow
time is the time that elapses between the points at which material enters the supply chain to the
point at which it exist. Another important area where inventory has a significant impact is
throughput. For a supply chain, throughput is the rate at which sales occur. If inventory is
represented by I, flow time by T, and throughput by D, the thee can be related using Little's law
as follows:

I = DT
For example, if the flow time of an auto assembly process is ten hours and the throughput is 60
units an hour, Little's Law tells us that the inventory is 60 x 10 = 600 units. If we were able to
reduce inventory to 300 units while holding throughput constant, we would reduce our flow time
to five hours (300/60). We note that in this relationship, inventory and throughput must have
consistent units.
The logical conclusion here is that inventory and flow time are synonymous in a supply chain.
managers should use actions that lower the amount of inventory needed without increasing cost
or reducing responsiveness, because reduces flow time can be a significant advantage in a supply
chain.
Supply Chain and Inventory Management
Total Visibility and Control of Your Supply Chain

NetSuite inventory management software offers a complete set of
inventory management, manufacturing and purchasing capabilities
that improves supply chain management and delivers an end-to-end
procure-to-pay process.
Gain an in-depth, real-time view into key supplier, inventory and
procurement indicators. Self-service capabilities for partners,
vendors and customers improve collaboration throughout the entire
supply chain. With NetSuite, you'll be able to better manage
inventory levels and costsand better meet fulfilment expectations, improving customer service.
Benefits
Get complete real-time visibility into demand, supply, costs and fulfillment measures and trends
Manage margins with a clear view into inventory costs, turn rates and inventory profitability
Eliminate manual inventory management processes and improve vendor satisfaction with a
seamless procure-to-pay process
Significantly improve your relationships with suppliers, vendors and partners by providing self-
service and real-time visibility
Effectively and efficiently meet customer demand, helping drive and maintain superior customer
service levels
Meet your industry's specific inventory management and purchasing needs with easily
integrated add-on solutions available from SuiteApp.com.
Key Features
Warehouse and Inventory Control
o Enjoy real-time, detailed visibility into key inventory control and supply chain
management measures, including inventory trends, stock on order, and supplier on-time
performance
o Slash inventory costs by tightening control of stock levels while increasing operational
efficiencies
o Increase product margins by effectively managing pricing based on different types of
customers, channels and currencies
o Gain control over inventory replenishment and ensure that you have enough on hand to
fill anticipated orders, while keeping excess stock to a minimum
o Extensive inventory management software features also include bin and lot
management, landed cost, demand-based replenishment, customer and volume pricing,
multi-location inventory, and more.
Purchasing and Vendor Management
o Eliminate inefficiencies throughout your organisation with convenient online purchase
order creation that allows you to replace paper-based forms and time-consuming
manual processes
o Streamline requisition processes and improve collaboration with vendors by giving them
self-service access to key data and information, including inventory reordering points
and transaction histories
o Track costs and eliminate errors by creating a complete business process flow through
purchasing, receiving and account payables.
Optimised Manufacturing Processes
o Streamline the assembly process by efficiently managing production work orders,
building multi-level assemblies, creating special purchase orders for components, and
seamlessly integrating with back-office operations
o Extend the reach of your NetSuite inventory management system with industry
manufacturing solutions available at SuiteApp.com.
Demand Planning
o Calculate demand plans leveraging historical data or sales forecasts
o Model how expected sales and purchase orders affect future inventory levels
o Calculate supply plans and automatically generate purchase or work orders.