Inventory glut at mid-size manufacturers in India


Last few months, I had an opportunity to visit around 15-20 mostly medium sized manufacturers of variety of products around Delhi/NCR region. Not all related to dairy and milk supply chain but across the board. It was disheartening to see the mountains of inventory everywhere especially of the finished products.

The owners clearly understood the financial and operational strain that high inventory levels puts on their company. They, however, did not understand enough of the supply chain management to deal with the problem. The usual blame game Р fickle clients, changing products, unstable markets, unreliable labors Рwas the norm.

The issues over and over appear to be:

  1. Poor understanding of the market demand. These companies either did not have a forecasting process or if they did it was merely the rubber stamping of the owner’s wishes.¬†The best of the bunch derived its forecast from the desired financial targets of the company.
  2. Lack of production planning. In most places it was driven by two factors. The priority was given to a customer order at hand and then not to leave a machine idle. If that means producing something or anything, they just did it. Guess where all that unwarranted production goes to.
  3. Product packaging. Rarely a thought was given to what product packaging variation (think 6 vs 12 in a box) they should consider. Multiple packs of different designs and quantity were every where.
  4. Crazy inventory policies. In one case they simply kept 90 days of inventory of all products at all locations including at their dealers. There were too many of these types of weird policies.
  5. Complete lack of distribution planning. It was more of get a truck at the best possible rate or from a friend/relative. Multiple shipments, lack of geographical consolidation, less than a truck load (LTL), rushed shipments etc. were routine practices.

These manufacturers were big enough to put together simple but effective supply chain policies. May be even start automating some of the processes even if it’s just a spreadsheet model.

I think that there is a market for an integrated supply chain system that is easy to use and cost-effective for small to medium size manufacturers in India. A training of key decision makers in fundamentals of supply chain management could also go a long way in solving the inventory and other related issues.

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