He may have lived in an age much less frenzied than our own, yet Henry David Thoreau nonetheless advised his acolytes to "simplify, simplify."
Today, simplifying is still the stuff of dreams for many a distribution manager. The complexity facing DC managers each day has reached a point where it has even provided the basis for a television advertising campaign (at least to those of us attuned to such things). Consider a recent ad in which a group gathers expectantly in an office supply store while a clerk sorts through printer cartridges. One fellow's face turns hopeful as the clerk reads a part number, only to fall when the final digit proves that it's the wrong part. The ad is for a large office supply company that guarantees that it will always have the right cartridge in stock.
Delivering on that simple-sounding guarantee requires perfect execution throughout a breathtakingly complex supply chain. As the advertisement hints, there's nothing simple about distribution in a time when consumers must choose from hundreds of types of breakfast cereal, let alone printer cartridges. An Ohio State study published a couple of years ago showed that U.S. businesses had done a good job of reducing raw material and work-in-progress inventories, but had made scant progress in reigning in finished- goods stocks. The researchers' best guess was that decisions on how much finished-goods inventory to hold were driven mainly by marketing considerations. The office supply company's promise to have the right cartridge in all stores at all times confirms their hunch.
What's happened, I suspect, is that in the last few years, logistics pros have had great success in accelerating the flow of goods. But rather than lowering total inventories, businesses have filled the void created by that speed by offering more products—something like adding a lane to a highway to reduce congestion only to find that it just attracts more cars.
It's what someone has called the toothpaste phenomenon. Once, your choice of toothpaste was limited to brand and tube size. Today, every toothpaste maker offers a gel, a tartar control formula, a variety with baking soda, an herbal formula, a whitening formula and so on.Without a smart inventory management and distribution system, we'd have warehouses overflowing with toothpaste. Asking already beleaguered DC managers to simplify under these circumstances would be like asking them to put the tartar control gel with baking soda and mouthwash back in the tube.
Gartner, Inc.
