What is the difference between supply chain management and inventory management?

Jean-Patrice Netter, President of Diagma helping to optimize Supply Chains

Imagine a supply network as a graph with nodes and lines connecting these nodes. The inventory is mostly stored temporarily in warehouses located on the nodes. The goods move along the lines from one node to another until they reach their final destination. Some transformation may occur along the way, the raw materials being transformed eventually into finished products. Supply chain management choreographs this global ballet of goods in the network.

Of course it’s not always obvious to manage globally. You may want to decentralize decisions and manage locally the goods temporarily stored in the warehouses. When the stock level becomes alarmingly low the local manager or the software he uses may call in a replenishment. We call this inventory management.

The supply chain manager will manage flows and inventory taking into account all sort of capacity and productivity issues along the way.

The inventory manager will concentrate on his local stocks and place orders to suppliers taking into account supplier leadtimes and tariffs. These leadtimes are a substitute for supplier capacity constraints. The tariffs give indications on the difference in cost if you place larger or smaller orders. Both lack finesse if you are after a fine tuning of your supply chain but they allow the goods to move across the network to satisfy customers at a reasonable cost.