Using a Supply Chain Responsiveness Matrix (SCRM)

Material spend is a significant portion of cost for most companies – in “Lean” organizations the cost of stock and materials is often closely managed to ensure that just enough material/inventory is maintained to buffer against supplier lead-time – avoiding overstocking and unnecessary waste.

Inventory analysis is a common theme within supply chain improvement programs and there are various tools with which organizations can use to understand (and improve) their inventory for example,

* Inventory turnover,
* Fast moving/slow moving stock

However, these tools are not adept at highlighting which function or department is carrying what percentage of inventory. Inventory is typically held to counterbalance lead time – and therefore there is typically enough stock held to enable re-ordering to be done to ensure that stock-outs do not occur- any inventory held above this requirement could be considered surplus.

However, with most organizations this is a target rather than a reality. Therefore understanding an organizations inventory at the various stages of it’s process can identify waste (over stocking) and help conceptualize the overall lead-time the organization is buffering against. The company is then armed with sufficient information to make a first pass at whether too much stock is being held.

A Supply Chain responsiveness matrix is one such tool, used for analyzing stock, process and lead-time. It is constructed by reviewing stages of the companies process and reviewing the inventory and lead time associated with each step – then displaying the results pictorially.

In the example below we can see that the process takes 33 days to complete and there is 48 days (lead time) inventory within the supply chain with a total lead time therefore of 81 days.

Example Supply Chain Responsiveness matrix

The approach does have some drawbacks however as there may be valid reasons for some “overstocking” for example – risk avoidance mitigating obsolescence, batch break buying. These may all account for surplus inventory but have been made with appropriate rationale.

However given these drawbacks, SCRM has many benefits:
* Once produced the diagram is very easy to understand
* Can help improvement teams “home in” on areas which have large stock holdings
* Can show areas that may represent quick win improvement targets.