All companies discuss how to improve visibility of the inventory that they directly manage within their own warehouse or distribution centers, as well as the inventory that they indirectly manage thru cross-dock centers, public warehouse locations, third-party managed facilities, or customer locations. Several supply chain industry organizations, including the Warehouse Education and Research Counsel (WERC) and the Council for Supply Chain Management Professionals (CSCMP), have identified that inventory visibility is one of the top three issues that keep leading company executives awake at night searching for the complete solution.
Most companies understand that in order to improve your direct inventory visibility and management, they can implement one of several leading inventory management or warehouse management applications. These systems are designed to support aggregate level inventory visibility (i.e. how much total quantity of a specific item do we have available for sale?) as well as discrete inventory accountability within a specific warehouse location (i.e. where is a specific pallet or carton of an item within our warehouse that is available for sale?).
As an organization, enVista performs 6-10 software selections/evaluations annually for customers across a variety of industry segments and vertical markets. In 2010, over half of the companies that we executed a software evaluation for had both direct inventory management requirements as well as indirect inventory management requirements and none found a single application to appropriately support both inventory requirements.
In fact, most of the companies we worked with decided to focus first on their direct inventory needs due to the immediate benefit and payback associated with addressing these challenges; the indirect inventory needs were relegated to a later phase of the project. No one can argue that the more immediate needs offering the largest opportunity for payback in the shortest time should be a focus for any organization; however, by postponing the more challenging and least tangible inventory management issue, these company executives are still prone to restless nights.
Although more challenging to address due to having to engage outside business partners in a partnership of trust, managing indirect movement can have an impact in the following areas of a company’s overall business:
Inbound Product Condition and Timeliness
If your organization utilizes an intermediate site to house inventory before it reaches your warehouse or distribution center, this product can be prone to damage or mis-shipment due to the nature of it being handled or touched incrementally. By being able to track inbound and outbound movement of these items, as well as the condition of the product when it is received and shipped thru these intermediate locations (typically hub or pool points), companies can proactively track their inventory, address potentially loss product that has been received, but not shipped for an extended period of time, as well as address damaged product before it reaches the final destination.
Regional Inventory Deployment
If your organization attempts to deploy inventory regionally in order to more quickly service your geographic customers, simply pushing inventory out to these locations blindly can lead to unnecessary inventory build-up, especially if the inventory is not being sold or turned in a reciprocating manner. By being able to verify current inventory positions at these remote locations, compared to customer commitments and planned replenishment shipments, your organization can adjust forecasted or ordered inventory to help insure the right product is in the right place in the proper quantities.
Companies that truly engage in value-add forecasting will get data points from their customer base as to their expected consumption of items and quantity over a specific planning horizon. Similar to the challenges under Regional Inventory Deployment, understanding how your inventory is being sold or turning at you customer locations will allow you to deploy the proper inventory and quantities, thus avoiding the headaches or reverse logistics or returns management. In addition, this customer performance information will also help you understand and model customer location performance with your items as well as competitive information sold by the same customer.
Manufacturing Production Schedules
Companies that not only distribute product, but also manufacture their finished good items have to balance raw material inventory availability combined with manufacturing production schedules as pre-cursors to deciding how much and to whom finished goods inventory should be deployed. Understanding not only your organizations days-on-hand inventory levels, but also downstream inventory levels can help your organization become more lean during product manufacturing and rely less upon stock-piling inventory in the hopes that orders will consume it.
Returns management (or reverse logistics management) is a taboo phrase that most distribution organizations do not want to address or becomes overshadowed by customer sales and outbound inventory movement. While distributors cannot completely eliminate returns management with their customer base, they can mitigate it through improved visibility to downstream inventory levels as well as customer inventory movement and turns patterns. By being proactive and calculated with your initial distribution approach, companies can minimize returns management and improve operational profitability.
Product Freshness and Date Sensitivity
For customers that distribute product that has a defined shelf-live or expiration date, understanding not only the inventory levels of your product in downstream locations is important, but even more paramount is the freshness and viability of the product outside of your own distribution network. Again, by having better visibility into your supply chain partner’s inventory levels, including product expiration dating, your organization can better understand the quality of the product you are pushing into the market, as this ultimately becomes a reflection on your organization, regardless if you are the final point of distribution. Are your downstream intermediate sites always shipping the oldest product out of their location in order to maintain proper inventory turns and inventory freshness? If not, this could be an opportunity to educate your supply chain partners on how to manage your product while improving customer service and eliminating product destruction or waste management.
Order Fulfillment Accuracy and Flexibility
Companies that have a discrete and accurate picture or their entire inventory snapshot are in the best position to be able to react to customer requests for orders that may fall outside the forecasted movement, but make ideal business sense to execute upon. Imagine being able to provide your customers with fulfillment options to handle their last-minute or outlier requests that could include:
- Order fulfillment from a non-standard warehouse location
- Multiple shipments from different locations required to fulfill a request
- A local pick-up or shipment option to your customer that may also present an option for them to purchase more product from a retail location, for example.
First or second on the same industry survey or top issues of leading executives is improving or maintaining your current customer service levels. The cliché information is power couldn’t be more appropriate for these companies, especially as it related to inventory management and positioning across your extended supply chain. Companies are eager to use this information for decision making differentiation, but rarely understand or are willing to undertake the difficult challenge of mining the required information in order to make a timely decision; emphasis on the word timely. We work with a lot of organizations that believe they have this information available to them, but by the time it take to manually extract, cleanse, and format this information it may be obsolete and only applicable for historical measurement, not forward-thinking execution.
For more information regarding how inventory management and inventory visibility can be impacted within your organization, contact enVista at email@example.com or Ken Mullen directly at firstname.lastname@example.org.