Turn your inventory from liability to asset with better data
Inventory represents one of the largest costs and least productive holdings of industrial companies. However, new technologies are providing some companies with the opportunity to convert some dormant stock into a valuable asset. Manufacturers that embrace this transformation will flourish, while laggards will find it harder and harder to compete.
“It’s now undeniable that to survive, companies will need to better optimize inventory,” said Sean Willems, professor of business analytics and statistics at the University of Tennessee’s Haslam College of Business.
The goal of any inventory revamp should be to create a system where the right products are available at the right time to customers, while carrying as little stock as possible. The key is visibility throughout the supply chain. This applies to post-sales service as well.
For example, the European operations of Sealed Air were challenged to maintain a high level post-sales service while experiencing rapid growth. They turned to UPS to reduce the time needed to get spare parts to their more than 500 field engineers.
After a comprehensive assessment, UPS recommended shipping parts using more than 15,000 UPS Access Point® locations across Europe. Customer service was enhanced, and the manufacturer was able to consolidate their 19 warehouses into one hub, saving inventory, infrastructure and operating costs.
The company is also able to view a complete shipping manifest for all processed shipments and track the status of individual parcels at any point in time, using the UPS Quantum View® Manage application.
Cloud is the big integrator
The cloud is essential for maintaining visibility. It’s a collaborative, secure platform where suppliers, manufacturers, transportation providers and end customers can share data to form a fully integrated supply chain. If a customer is running low on goods, not only will the manufacturer know, but so will suppliers. This architecture—run in-house or outsourced to a third-party logistics provider—can support aggressive inventory optimization.
The cloud is a repository for Big Data—information can be collected from a broad range of sources including smart products, the Internet of Things and even unstructured data from social media, which, for example, could give a manufacturer a heads up on unexpected demand.
Big Data’s real-time nature means companies can move from updating their inventory needs quarterly to monthly or even weekly for more optimal stock keeping. Data analysts should partner with subject matter experts to apply this data to determine, for example, whether to move more inventory to a particular region and reduce stock in another. “This is where you need to marry operations planning with sales,” Willems said.
Inventory optimization helps companies reduce manufacturing costs by more closely aligning production volumes with demand.
Rightsizing the supply chain
Analytics and Big Data, combined with closer partner collaboration, can further help companies use inventory in transit to meet customer demand. Rayford Collins, supply chain optimization expert with UPS Customer Solutions Group, said any product that’s not already in customer hands could be viewed as inventory. “You reduce everyone’s inventory carrying cost, the operational cost of handling a product multiple times and the cost of storing it,” Collins said.
This brings up the question of optimal supply chain speed when moving goods to market, and how to manage the tradeoffs. Big Data analysis can help determine whether it’s better to pay premium freight to move a product—speeding up the supply chain—or use standard shipping.
The first option is better if there’s a high level of uncertainty around a product or when a company is targeting a new geography. “You don’t want a pipeline of products that won’t sell,” Willems said, adding that leading-edge companies use a hybrid model with a shorter, more expensive supply chain for new offerings, switching to a more cost-efficient model if sales are strong and predictable.
It’s critical to make all this information easily accessible through mobile apps for smartphones and tablets. It should be available to all key constituents in the supply chain and integrated into accounting and enterprise resource planning systems. For instance, business-to-business customers could use an app to view a manufacturer’s inventory and set up an alert if production needs to be stepped up.
Manufacturers, in turn, should have visibility into their suppliers’ operations. And throughout, data encrypted end-to-end ensures better overall security.
Rethink your inventory strategy. UPS experts show you where to start looking, right here.
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