Friday 18th Oct 2019 - Logistics Manager Magazine

Does the shoe fit?

Every business has its own unique set of needs and requires a tailored fit inventory management solution to support it. Maria Highland looks at whether the shoe fits.

Times are ever changing – as are people and habits. Consumer demand governs what sits in the warehouse, and vice versa how inventory management is tackled. Correspondingly, the way businesses have approached inventory management has changed in recent years.

Alex Mills of Chess and ProSKU says inventory management systems “have become more flexible to accommodate new ways of working and new business priorities. For example, many businesses have developed multichannel operations to service the requirements of different types of customer. No two businesses are the same so the complexion of these multichannel solutions will vary from one implementation to the next.”

However, continues Mills, “the IM/WMS has to be flexible enough to meet the overall business requirement and priorities. At the same time, all businesses have been driving down costs through simpler processes, efficiencies, automation and lower inventory levels. IM/WMS have to be adaptable to enable rather than dictate the chosen processes and business priorities.

Keeping up with change is vital and can mean the difference between good operations and excellent operations. “There should be a constant review of how stocks are ordered and managed, inventory on the shelf is working capital tied up. Everyone should be looking at the best and most efficient way to manage its stock,” says Ingenica Solutions founder and chief operating officer Nicola Hall.

In particular, Ingenica worked with the NHS and its inventory management systems. “In the past the NHS did not really focus on the level of stock it had and whether those stocks were being managed well, or whether the organisation had full visibility of how they were used and where. To a degree it operated a “just in case” basis. It has an importance in the NHS because essentially the consumer is a patient,” says Hall.

“Previously it relied on clinical staff and some materials management staff to separately manage stocks for their areas, and suffered variation as a result. In the NHS we are now seeing the adoption of full inventory management solutions based on historical usage. I foresee that as inventory systems are put into use, the NHS will become much more sophisticated in its use of inventory techniques in different areas.”

As demonstrated by the NHS, keeping track of physical stock and maintaining visibility is usually the main culprit. “Historically, the weak spot in any supply chain has been in the physical inventory,” agrees LEO Lane co-founder and vice president business Lee-Bath Nelson. “Although its main benefit is allowing timely delivery, it is still a burden for companies that pay enormous amounts of money to maintain it. Forward-thinking companies are always looking at ways to improve inventory management and reduce the costs (storage, shipping, disposal of surplus physical stock etc) associated with it.”

Building on this, Nelson notes that typical issues encountered by businesses when it comes to inventory management “are things like storage costs, shipping costs and the issue and expense relating to disposal of surplus/obsolete physical stock. Also, an issue is the need for inventory rebalancing across various geographies in which the company might be operating.”

JDA vice president retail industry strategy Wayne Snyder points out that “different industries have different inventory management problems. Looking from a grocery perspective, for example, suppliers are under pressure due to the perishable nature of the goods they are providing. The automotive industry, meanwhile, relies on a very time-sensitive supply chain, making sure all the parts needed to make a car arrive exactly when required for production.

“Businesses need to not only understand any supply disruptions quickly but be able to respond appropriately,” he says. “By using new technologies to track shipments, companies are better able to understand any potential shortage or delay, from changing weather conditions to problems with raw materials, can arise anywhere along the supply chain.

“Needing to be able to service customers from multiple locations at low cost is complex and inventory in the wrong place can prove costly. This is made even more complex due to the high volumes of returns which can lead to inventory being in a non-ideal location,” adds Snyder.

This is especially true for manufacturers. “Having the right part in stock at the right time is a major issue in inventory management,” confirms Syncron chief marketing officer Gary Brook. “A missing part can lead to disgruntled customers, as well as lost profits and revenue for the manufacturer. Exceptional – and profitable – service means having the correct parts at the right place and time.”

 

Running diagnostics

Mills highlights efficiency, automation, connectivity and multichannel support to be the main issues that businesses encounter when it comes to inventory management. Taking this into account, a lot rides on how a business approaches its inventory management and how suitable it is for its needs.

He explains that accuracy “is the basic inventory management requirement. All else follows from this. Although paper-based systems can be accurate, it is relatively easy for errors to creep in and cause inefficiency and inconsistency.”

And investing in “IM/WMS helps to reduce errors by enabling accuracy and consistency. They help eliminate the need to manually enter or re-key information at each stage of the process,” he says.

Next, all businesses want efficiency, which makes it an obstacle for there is no one magic formula for everyone. Mills notes that “businesses want greater efficiency, which can include better accuracy, greater productivity, adaptability, flexibility and support for new processes.”

Again, the correct IM/WMS supports this “through faster decision making, data accuracy, automated interaction with other business applications, time-saving features, and so on.”

Mills continues, noting that automation can be an issue in inventory management as automating the way data is collected reduces time spent entering data and rechecking it. However, this has “evolved into providing interfaces with barcode scanners, data terminals and other business systems. Today, the requirement is for the IM/WMS to interface with a wide range of hardware devices, applications and data types/formats.” Therefore, business need to ensure their tech is up to par and supports their needs.

Another obstacle is connectivity, as “inventory management systems are increasingly integrated, or at least exchange information, with a wider range of business and customer-facing applications from all parts of the supply chain,” says Mills. “These systems need simple interfaces that enable the exchange of information in the correct formats with few restrictions.”

Supporting this, LEO Lane’s Nelson believes “that it is paramount for any system to work easily with other software and platforms/solutions and to integrate easily with them.”

The final issue highlighted by Mills is multi-channel support. “Traditional warehouses tended to cater for one channel. Now the same facility is quite likely to serve business, retail and e-commerce customers. This means different priorities – based on different SLAs or service commitments/promises – often at different times of the day so as to meet dynamic cut-off (last order) points to ensure maximum fulfilment rates.”

He continues: “IM/WMS can support these and other priorities by dynamically tracking items, building picking list, load compositions, allocating tasks and balancing resources and workloads in real time to ensure the maximum number of orders are fulfilled at the right times of the day.”

Indeed, “consumers have become accustomed to 24/7 service, access via any device and switching suppliers to obtain the purchase they want at the right time for the right price,” confirms Syncron’s Brook.

JDA’s Wayne Snyder agrees, acknowledging that “omni-channel retailing has increased the complexity of stock management exponentially with many stock locations required to service sales channels. At the same time, customers are becoming even more demanding, with availability stated as their most important factor in their shopping experience in the JDA Consumer Survey 2018,” he adds.

“To manage this, organisations are looking for technologies that enables them to accurately predict demand by product by touchpoint by day,” says Snyder. In this regard, he believes that “data holds the key to inventory management; the best systems take insights from across the entire supply chain to develop valuable predictions about demand and inventory. Acting on real-time information means organisations can forecast accurately, ensure stock availability and adapt to changing conditions.”

And he isn’t wrong. “At the core of the new era of pre-emptive service is predictive analytics, which allows manufacturers to make predictions about future events,” asserts Brook. “When a predictive analytics solution is integrated with a sophisticated inventory management solution, manufacturers will not only stock parts when and where they are needed.”

Both retailers and manufacturers need to respond to fluctuating consumer demands. Brook explains that “manufacturers need to transform their service parts supply chain from a costly and inefficient “just in case” model, to a highly efficient “just in time” model, where inventory levels are optimised, and service part fill rates are near 100 per cent.”

He recommends that to achieve this, an inventory management system that can predict the impact of decisions, achieve accuracy with seasonal forecasting, eliminate excess and obsolete stock and that provides advanced analytics should be considered. “Quick and easy-to-access analytics are key to any successful inventory management program. Immediate access to data – and suggestions for making that data actionable – should be the foundation of every service organisation,” he states.

However, when it comes to predicting demand, Snyder believes that “the best systems rely on AI and ML to quickly and effectively predict where problems may be likely to arise and recommend how best to react, rather than having insights from data sets that simply flag there is an issue.”

For example, says Snyder: “Control towers can incorporate real-time information from the entire supply chain and extended third-party digital ecosystem, from shipping times, to weather, to traffic and even social media.

“These can all provide excellent insight into a company’s operations; help avoid stock shortages and make sure that everything is accounted for. It means that companies can see, interpret and act on real-time information from the entire digital ecosystem that they inhabit.

“This allows companies to sense unexpected events across their cross-enterprise supply chains, identify the possible impact of actual and potential disruptions on inventory management and prescribe recommended corrective action with machine learning (ML)-based guidance,” he concludes.

“I certainly see the use of IOT, block chain, machine learning and AI in the future,” agrees Ingenica’s Nicola Hall.

And with inventory management being heavily invested in the right technology and rooted in data, it is pushed further towards the virtual. And a “move to a virtual inventory necessitates a different approach to traditional inventory management with an emphasis on tracking and maintaining a digital thread per item,” says LEO Lane’s Nelson.

“In addition, it is more crucial than ever that the inventory management system be integrated with other systems in the organisation because virtual inventory now comes before manufacturing in the supply chain,” she adds.

Brook agrees, noting that “to make sure the best business intelligence is available, companies need to move beyond the silos of traditional computing and migrate to the cloud. This move enables organisations to merge all their data into a single view to receive updates on the status of working parts and efficiency of equipment.

“Modern, cloud-based service parts management solutions can help manufacturers increase margins, customer service levels and overall uptime standards,” he says. “A sophisticated service parts inventory planning solution will provide logical, automated steps for maintenance and repair, delivering parts to the right place at the right time – ensuring a repair can be made before a breakdown occurs. This solution can tie into existing ERP systems, allowing organisations to track parts and eliminate obsolete items.”

Likewise, Nelson notes that, from the perspective of a solution provider, it is “providing a software solution that protects and preserves a digital product or part design by controlling how it is produced on behalf of the enterprise/brand that owns it. This exemplifies the technological advances that are improving the way inventory management systems work.”

And for her, the “main technology that is transforming inventory management is 3D printing/AM – specifically via on-demand/digital inventories and localized manufacturing.

“In fact, this even changes the basic order of the supply chain,” she says, “digital inventory comes before manufacturing while physical inventory comes after it. When moving from physical to digital the supply chain becomes more agile, on demand and lean. 3D printing/AM keeps items digitally for as long as possible via virtual inventories. This lowers inventory and logistics costs, eradicates the need for inventory rebalancing and eliminates obsolescence. In turn, it reduces costs of disposal of unused stock, which is also good for the environment. Re-creating obsolete parts also enables better support for long-time customers and ensures higher customer satisfaction.

“Finally, 3D printing/AM also enables the production of complex geometries, that would otherwise involve many parts (and therefore potentially many suppliers, each of which could be a bottleneck),” concludes Nelson. “This has the potential to further simplify the supply chain.”

 

The final stretch

There is no magical fit-for-all formula that equates to successful operations, however it does need to be the correct for the business in question and fit for purpose. No use turning up to marathon in high heels or vice versa in trainers to a black-tie event.

Mills believes that a “good IM/WMS will support and enable – rather than dictate – business priorities and processes. In addition to the features mentioned above at the very least it should support goods inwards, put-away, stock movements, order picking, load assembly, despatch, stock-taking, and reporting. Many of the leading systems provide much more.”

And more and more companies are taking such issues into consideration. Mills attributes this to businesses of all sizes recognising “that cloud-based IM/WMS allow them to deploy highly effective solutions with few of the technical complexity and cost overheads associated with traditional managed solutions.”

Likewise, “smaller businesses in particular understand that cloud-based solutions allow them to deploy such solutions at an earlier point in their own evolution,” continues Mills. “In many cases the gains in productivity and efficiency will provide payback from day one. Moreover, any costs can come from revenue rather than capital expenditure.”

So, the question isn’t one of when to invest but of how: How well does your inventory management solution fit your business needs and do you need to readjust your footing in that aspect? After all, you don’t want to turn up to a marathon in heels.

 

This article first appeared in Logistics Manager, May 2019.