Inventory Management in the Digital Age

Companies increasingly invest more effort and time into digitizing their supply chains and backend operations. However, only a few unlock the real potential of digital technologies.

According to a recent study by McKinsey, the average supply chain has a digitization level of 43 percent, the lowest out of five core areas that were examined.

 

Only two percent of surveyed executives agreed supply chains were a focus area of their digitization efforts. The same study suggests that companies that aggressively digitize their supply chains can boost their earnings before taxes and interest by 3.2 percent.

The low rate of supply chain digitization has to do a lot with the capabilities made available by technologies. Supply chain and inventory digitization mainly focused on end-to-end planning, warehouse management, and fine-tuning analysis on which decisions were based.

These traditional technologies didn’t offer a way to transform supply chains by linking and putting together cross-functional data, uncovering underlying issues by delving into ERP, warehouse management, and other systems at the same time, or forecasting demand and performance with analytics to course-correct in time.

Digital-Age Inventory Management

Inventory is any goods and materials a business keeps at hand to be able to meet customer demand. Inventory includes raw materials, work-in-progress, components, assemblies, finished and packaged goods, and maintenance/repair items necessary to support a production process.

In an ideal world, all items seamlessly shift through the supply chain process, yielding a quick payback on their investment. In reality, supply is rarely equal to demand, leading to inventory expenses amounting to as much as 45-90 percent of an average business’s total budget.

The adoption of specialized digital systems for inventory management can lead to several use cases-

• Multi-location tracking – Businesses running across locations can maintain a single central repository of inventory information and track items by serial numbers, barcodes, stock-keeping units, and so on. This enables you to find parts and products easily, monitor locations, trace item transitions, view stockouts and overstocks.
• Low inventory alerts and automated replenishment – Alerts appear in your dashboard and warn of low inventory levels. While an automated system can automatically create and send purchase orders for frequent reorders.
• FIFO tools – FIFO means first-in, first-out, and is a principle that the oldest inventory should be sold first. Digital FIFO tools can help support that principle and help identify slow-moving or obsolete stock.
• Performance analysis – With cutting-edge technologies, inventory data can be automatically analyzed, and suggestions can be made on replenishment dates and quantities. Such a tool can also identify top-performing products as well as those with low profitability.
• Real-time reporting and analytics – Sophisticated digital solutions for inventory management can help measure several metrics and generate visual reports on inventory levels and performance, helping identify weak and strong points within the inventory.
• ​Demand forecasting – One of the most challenging aspects of supply chain is predicting future demands for production. Machine learning is proving to be effective at taking into account parameters that the existing methods have no way of tracking or quantifying. By using relevant data to predict demand, companies can reduce wastage of inventory and optimize inventory costs. While machine learning can look at historical transactions to predict the demand for a product already in the run, the technology can also be used to forecast demand for new products, including factors that drive new sales.
• Accuracy in measurement of overall equipment effectiveness – Companies are using the internet of things and machine learning to extend the life of key supply chain assets, including engines, warehouse equipment, machinery, and transportation components. Machine-derived data is used to determine factors that influence machinery performance payment of the overall equipment effectiveness.

Real-World Supply Chains With Automated Supply Chains

Cisco’s diverse and extensive supply chain spans the world. Only recently, they transformed it to increase agility, resilience, and the ability to scale by implementing new business models, a single ERP instance, automation, and standardization.

McDonald’s is a known brand for managing their supply chain effectively with the system where it exchanges value and success with its suppliers. The company serves over 68 million people every day.

Unilever is the third-largest in its segment, offering beverages, personal care products, and food. At the beginning of this century, Unilever started a five-year growth plan that aimed at restructuring their supply chain. They focused on supply chain executives, procurement processes, organization, supplier involvement, and digital transformation. After that, Unilever became a leader in the packaged industry for its digital initiatives.

The Technologies Underlying Digital Inventory Management

If retailers and manufacturers want to compete in today’s cutthroat landscape, they will need to revolutionize backend operations. Digital technologies can help implement improved business processes that allow traditional retailers and manufacturers to deliver the pricing, shopping experience, and product choice that today’s sophisticated customers demand.

When it comes to building a digital inventory management system several Technologies can play a key role. The IoT technology can enable the capturing of data from several touchpoints within a warehouse and manufacturing unit. This data can then be analyzed using Data Analytics and big data Technologies to lead to important insight into manufacturing or retail business operations.

Further machine learning and artificial intelligence can work on the data to identify patterns and bring us to several use cases discussed above. End to end inventory visibility, optimization, and cost reduction is possible only with the combined effect of all leading technologies.

Real-time Inventory Management

With the Internet of Things and other supporting technologies, retailers can manage their inventories in real-time. As connected systems track and trace products, they can also send relevant information to inventory management systems without having a human ever interrupt the process.

This way, inventory levels can be automatically updated in real-time, allowing retailers and manufacturers to implement just-in-time manufacturing and delivery strategies that minimize excess inventory. By reducing carrying costs, retailers can increase operating profits and store employees can focus less on taking inventory and more on enhancing customer service and improving customer interaction.

Additionally, trackers can be placed inexpensive products to secure them from theft. By allowing retailers to improve their product mix, minimize inventory levels, and escalate operating profits, a digitized inventory can increase revenue and lead to sustainable growth.

At Gleecus, we make Modern Digital Inventory Tracking possible for manufacturers and retailers. Talk to us about your digitization journey today!