What Star Wars Can Teach us about Supply Chains

Today is Star Wars Day.  And everyone is running around saying “May the Fourth be with You.”  So I thought I would publish a post on what I consider to be one of the best supply chain stories of all time.  The story is how the toy company, Kenner, confronted with the ultimate challenge of forecasting demand for a new product launch then developed an ingenious solution which ensured it did not miss out on the lost sales due to out of stocks.

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When Excess Inventory is a Good Thing

Rarely do you read about supply chain scenarios in which companies stockpile excess inventory as a deliberate business strategy.  Perhaps the only example I can think of is the forward-buying techniques sometimes executed in the retail and pharmaceutical industries to take advantage of promotional prices from suppliers.  In this economy, however even the biggest risk takers might be reluctant to pursue such a price arbitrage strategy.  Inventory levels in the automotive, consumer electronics, apparel and luxury good segments have been at record levels for most the past several months.  In fact, economists have been monitoring finished goods inventory levels throughout the recession hoping they would be depleted to the point that buyers would place orders again.  Economic planners are hoping that such as buying cycle might be the catalyst for the start of a growth period.  There have been few signs of such a recovery yet, however, as most companies continue to take extraordinary measures to move assets and inventory off their books.   Nonetheless, there are scenarios in this economy in which supply chain planners are actually bulking up on inventory.  In fact, just this past week two of the world’s largest buying organizations are exploring programs to purposefully expand their safety stocks of inventory.

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What is an In-House Bank?

In recent years many multi-national corporations have established their own, “in-house banks.”  The in-house banks are not officially regulated or licensed financial institutions.  However, they act much like a commercial bank by offering payment processing, liquidity management and collections functions to various subsidiaries of a large, global corporation.   Technology is a key enabler to in-house banking.  In my opinion, banks are becoming more and more of a technology business every day.  Most of the services banks perform are not conducted by people, but instead by vast computing networks.  As banking goes digital, the barriers to establishing a banking function are reduced. 

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