What can we learn from the Tour de France in terms of Inventory Management?
by Aad Smits
This weekend, the 106th edition of the Tour de France will start. Although cycling and inventory management are two completely different things, you’d be surprised how similar they can be when looked at closely, from a different perspective.
1. Determine your strategy
When a team participates in the Tour de France, their first decision is about the objective of their participation, so there is a clearly defined strategy. The Tour de France consists of different stages where different specialists could outperform. There are usually sprint stages, mountain stages, time trials, but also stages which are suited for breakaways. A team could focus on individual stage wins or try to win the general ranking. A good cyclist would know that it’s almost impossible to focus on multiple rankings at the same time.
In inventory management it also starts with determining your strategy: if you’re a customer-oriented company and want to provide the best service to your customers, then the assortment should be aligned with the strategy, as well as the services you provide. It is almost impossible to focus on all areas at the same time: it is always a trade-off between costs, quality and speed. You can do two of them, but you can’t do all of them.
2. Specify the assortment based on the strategy
Once the strategy is known, a team needs to be selected with the best riders in order to meet the objectives. If a team purely participates for the general ranking, then it often consists of one team-lead, accompanied by servants to keep the lead out of the wind and to carry food and drinks. We can further distinguish between servants and servants with a specialisation in flat surfaces, in hilly areas or even mountains.
This can be compared to the companies’ assortment that should be in line with its strategy. When you’re a service oriented company, your customers expect you to have a broad assortment and that you’re flexible with deliveries. If you’re focusing on cost efficiency and operational excellence, these are strategy choices with consequences for the assortment. Here we don’t expect a big long tail because that would lead to lower stock turns and higher costs.
3. The importance of data
Professional cyclists nowadays are nothing without data. Riders are surrounded by complete teams including technicians, soigneurs, cooks, dietitians, doctors and other professionals. Based on measurements and data analysis, they know exactly what is good for each rider and what is not. And that is definitely not the same for each cyclist, so it is specified for each individual. During a training all data is gathered such as heart rates, wattages, cadence and so forth. This is used to determine the optimal training program for each cyclist, but also to know the strengths and weaknesses of each cyclist, for example, a rider’s turning point and how long each rider stay on his or her limit. Data is also used to define the optimal diet per cyclist, this is even specified per stage in the Tour de France!
Talking about inventory management, data can support in several ways. First of all, data can be used to make strategical decisions, such as defining your warehouse locations based on the strategy, on customer areas, and on costs of transportation. This is really the foundation of the logistics blueprint.
Second, data can be used as basis for tactical decisions. An example is how the incremental margin analysis supports assortment decisions. If a product doesn’t make any money, what is the reason to keep it in your assortment? If there are no strategic reasons to keep it, then why not phasing it out? Another example is how data could support in deciding what to supply from stock and what to supply based upon customer orders only. The more data available, the more insights and the better decision making could take place.
Last but not least, data can be used for operational input such as the calculation of the optimal forecast. Here we look at historical data that can be used to determine a forecast, but it also requires information from the market that could be used as internal or external input for the forecast, such as promotions or future events, competitor prices and the weather forecast. All this information together should be combined to obtain the best results.
4. Without collaboration you can't win
In the Tour de France, no one can win completely on their own. Either if we talk about a stage win, or the general rankings, all winners heavily depend on their team mates. Sprinters have their own ‘trains’ in the last kilometers of the stage which bring them in the best position at the beginning of the sprint. Domestics keep their team-lead out of the wind and carry food, and try to keep the team-lead in the front of the peloton. Within a team, all cyclists have a communication system where they can communicate to the team manager and with each other. This enables team mates to inform each other about the circumstances of the stage, but also warn in case of dangerous situations or react to sudden changes in the race. If the quality of collaboration and/or communication is poor, which could be because of opposing interests within a team, this will definitely affect performance in a negative way.
Once the supply chain strategy is clear, the assortment is defined, and data is used to optimise the company’s internal processes, it’s time to look ahead and to collaborate within the supply chain. Sharing knowledge and sharing information helps to better understand your suppliers and/or customers, and therefore will lead to better results. Think about sharing forecasts with all links in the chain, or go one step further and also share stock levels and production capacities. This could help to create smoother and leaner supply chains where bullwhip effects can be largely prevented.
5. Be proactive rather than reactive
All teams in the Tour de France have one ‘road captain’. This is most of the time a senior cyclist with a lot of experience, who co-decides on the strategy of the team; you can compare it with the captain of a football team. The road captain prepares the stages, and also discusses the strategy for the next stage. In order to have the best preparation, road captains often go explore the course long before the official stage takes place. They make plans for each stage on a very detailed level, for example in which bend of the mountain the team-lead should attack to beat the competition. This really requires accurate preparation and knowledge of cycling, but it can make the difference between winning and losing.
In inventory management it’s also all about preparation. Imagine that you’re in a highly seasonal business, for example when you sell ice cream or swimming pools. As soon as summer arrives, you need to make sure that you have enough stock, otherwise you’ll lose money. It’s hard to exactly predict when the weather changes, but you need to make sure that when it does, the stock is available by then. Another example is if you sell consumer electronics and you have some nice promotions for Black Friday. In that case you need to make sure that you have the right stock for the right items at the right place. Analysing the same event in previous years could help to determine previously realised lift factors. You cannot let insufficient stock ruin such an important day.
So what did we learn from the Tour de France in terms of inventory management?
Even though inventory management is not the first thing you’d think about when you hear people saying Tour de France, it is a great tool to help us learn and remember important lessons about inventory management. The main lesson revolves around strategy. Once the strategy is clear, it is possible to define the assortment. Here, data and analysis should be used to improve the quality of decisions. The next step is communication and collaboration between links in the chain, which helps to obtain a better overall performance. Lastly, focus on exceptions – try to anticipate instead of react, and pay attention to the right level of detail. These steps will help you to optimise your inventory.
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