Strategic Inventory Management for New Products : A case study within a SME with Low-Mix, Low-Volume & High-Value products

Small and Medium-sized Enterprises (SMEs) with Low-Mix, Low-Volume and High-Value (LMLV-HV) products face challenges balancing Inventory service levels (ISL) and Inventory carrying costs (ICC), particularly during the industrialization of new products. Uncertainties in demand, lead-times, and supply chain variability amplify inventory management complexity, elevating the risk of stockouts or high ICC. This study explores inventory management strategies in SMEs dealing with LMLV-HV products during the industrialization of new products. The purpose of this study is to develop a process for managing inventory during the industrialization of new products in SMEs with Low-Mix, Low-Volume and High-Value products. To fulfil this purpose, three research questions were asked, [1] How can demand be forecasted during the industrialization of new products? [2] What factors influence inventory service levels and inventory carrying costs in SMEs with Low-Mix, Low-Volume and High-Value products? [3] How can influencing factors be accounted for when balancing inventory service levels and inventory carrying costs within SMEs with Low-Mix, Low-Volume and High-Value products? Methods The study relies on an embedded single-case study within a SME with LMLV-HV products, during the industrialization of new products. Qualitative and quantitative methods are used for data collection and analysis. The data collection consists of interviews, document studies and observations. Results Findings revealed the main methods used for forecasting demand during the industrialization of new products. Moreover, the main factors influencing ISL and ICC was found to be demand variability, forecast accuracy, internal and external lead-times and the trade-offs and strategic alignments within the company. Moreover, to account for these factors, item differentiation, buffer management and inventory strategy management was used to balance ISL with ICC. Analysis Through exploration of historical analogy in combination with judgement methods, demand for new products could be forecasted, whilst highlighting the need for continuous evaluation and adjustments. Furthermore, demand variability, lead-time variability and supply chain complexity were factors influencing ISL and ICC, emphasising the need for aligning inventory policies and key performing indexes (KPI). A process for strategic inventory management was developed, derived from the theoretical framework and through answering the research questions. Discussion Insights into how SMEs within the context of LMLV-HV products can navigate through the balance between ISL and ICC resulted in a practical process for strategic inventory management, derived from the three research questions and theoretical findings. This study provided practical implications through this process, acknowledging sustainability and theoretical findings. Conclusion The proposed process is conceptual, requiring implementation and evaluation within an organization to understand its effectiveness. Inventory management methods and processes exist within current literature, their applicability in the context of new product development and balancing ISL and ICC through strategic inventory management, is new.