Wednesday, January 29, 2014

Inventory management in IT projects

Traditionally we think of inventory management more often in the manufacturing, retailing, and transportation industries. However, it can also be focused to a project in a company.

On one other class, my group did a presentation on the IT transformation project that enabling the company to change its portfolio drastically during a short period of time. During the presentation I was asked a question that during the change in IT infrastructure, IT policy and frequent acquisition and divestiture, how do you suggest the company to manage the supply chain problem. I didn’t know how to answer that question at the time, but afterward, I put some effort to it and combining with the reading from Bain’s company. I can share some of my thoughts.

First question to ask is: Have your organization categorized your goods into safety, replenishment, and obsolete?  

 In an IT project, we have to define what the “goods” is. I think it should be a combination of talented specialists, project managers, venders, time, capital, the actual “goods” such as server, laptop, printer and so on. In this sense, I would say that for a specific IT project, the organization has to analyze the needs, what are the human resource, capital, venders needed to accomplish the minimum objective of the project; and that should be similar to the safety inventory. Then what the additional resources required are to support the project when uncertainty occurs. Finally, define those resource that are no longer productive or up to date. Those should be the “obsolete inventory”.

Next question to ask is: Is your company using the most effective method to calculate your safety stock levels?

In our IT project case, the safety stock level becomes the minimum resources required to achieve the objective of the project. In the pure inventory management case, it is suggested statistical formula can be applied to historical data to get the insight. While in IT project case, it is very hard for historical data to play a role in the human resource and time part, due to the fact that every project are different, technologies are changing constantly. But the empirical method can be applied to the tangible goods such as servers, projectors, laptops and so on. Sometimes it is hard for companies to even have those historical data for the goods, because they are provided by vendors and vendors also have to rely on their upstream source. So if the project manager wants to have an accurate delivery time of those orders, it would be very helpful if the vendors can apply empirical methods or statistical tools to their historical data from their supply chain. It can mitigate potential loss from either late delivery or the tied capital due to early booking.

But still one question remains that how do organizations determine their “safety stock” of human resource and time based on solid proof rather than solely experience?

2. Harvard Business publishing-Managing Inventory by Janice H. Hammond

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