Use of Legacy Systems Lead to Excess Costs, Lack of Visibility Into Current Inventory Levels, Study Finds

By: Gatepoint Research, E2open
June 29, 2015

Inventory information sharing is time-consuming and often results in visibility levels between "average" and "none," according to a report from Gatepoint Research.

Only 26 percent of the respondents, from such industries as manufacturing, retail, and telecommunications, said visibility into current inventory levels was "great." The research was sponsored by E2open, a provider of collaborative planning and execution software solutions.

The findings expose an underlying paradox in the industry. Though there's an increased interest in inventory management programs, such as VMI, that aim to reduce costs and improve customer service levels, companies continue to face challenges in actually establishing these programs.

Key survey results highlighting this trend include:

• Overall, VMI is not employed at all by nearly 30 percent of survey respondents.

• Yet, the opportunity for implementing a VMI program is clear: 36 percent stated that their organization has too much cash tied up in inventory, and 29 percent said that they have excess and/or obsolete inventory.

• Only 33 percent felt that inventory levels reflected optimized cost and service levels.

Said Pawan Joshi, vice president of strategy, E2open: “Though VMI is a proven approach for creating a highly responsive, demand-driven supply chain, the latest research shows a holding pattern in VMI program implementation. However, the investment in implementing the right processes and technologies to establish a VMI program yields a wealth of benefits to both suppliers and brand owners alike, including a real-time response to potential upsides or disruptions in the supply network, which leads to more effectively managed inventory and enhanced profitability. We look forward to leveraging our in-depth expertise to partner with companies to help them implement VMI programs to capture additional value from their supply chains.”

For the 2015 survey, 73 percent of respondents were from Fortune 1000 companies. The 2015 survey is a continuation of several years of ongoing research. Several key trends have emerged from the last three surveys from February 2013 to March 2015 (with 300 respondents total), which include:

• Using VMI on both buy-side and sell-side is relatively rare. Only 30 percent of those surveyed report this capability, whereas those implementing solely buy-side VMI programs outnumber those implementing solely sell-side programs by more than two to one.

• Visibility into time-sensitive supply chain data continues to be a struggle. More than half of those surveyed reported that their business cannot share daily forecast information.

• There is a sustained demand for better inventory management collaboration. Among those surveyed, nearly one-third reported collaborating “poorly” or “not very well” with trading partners.