Inventory control and supply chain management has evolved on a near continuous basis since the 1980s. Although the tools and technology that back the supply chain have constantly changed, the aim of supply chain planning has remained constant: to get the right product to customers in a timely manner, and to safeguard against stock outs and other inventory issues. Having picked the low hanging fruit over three decades of continuous improvement, inventory management leaders are now turning to automation to bring even greater efficiency and visibility to the supply chain. What does greater supply chain automation mean for your business?
Automation: A Primer
Individual aspects of the supply chain have been automated previously, such as procurement, inventory receipt, warehousing, stock taking and order fulfilment. Although automating these tasks, or parts of these tasks, generally reduces lead times, the time needed to link up each stage of the supply chain remains a liability. Additionally, where people working in different areas of the business fail to communicate well, any efficiency gains can be quickly lost.
Supply chain automation involves connecting automation at each stage of the supply chain, running the supply chain as one interdependent process. For example, an obvious approach to automation involves linking manufacturing with procurement; when a manufacturer creates an assembly in inventory management software, business rules can define whether the inventory management software should initiate a new order to replace the used inventory. If inventory is below a certain level of safety stock, the inventory management software may generate a purchase order and send it to the procurement manager for approval. In the past, stock may only have been ordered in response to a stock take.
Potential Gains from Increasing Automation
All too often, businesses are slow to respond to inventory management issues that need an urgent response. This is understandable – inventory managers are busy and often have to manage a number of competing priorities. Automation can relieve some of this pressure, making it possible to run a number of inventory control tasks in parallel. By automating core inventory management tasks, issues are spotted and dealt with immediately instead of waiting to be caught at the next scheduled stock take.
By linking the entire supply chain together, supply chain automation makes it easier to make strategic decisions that affect the entire supply chain. Modelling the impact of a given change to one aspect of the supply chain is much easier when data from each stage are linked up. For example, if your business is considering reducing order frequency to take advantage of off peak transport, a full suite of inventory management data would make it easier to understand the impact on production, sales and order fulfilment.
In the same vein, automation may soon be used to manage the impact of adverse inventory control events with minimal staff intervention. If a supplier runs out of inventory, a highly automated system may be able to identify which other suppliers have capacity and modify procurement plans to compensate. For many businesses, increasing automation may reduce supply chain vulnerability and improve their ability to respond to adverse events. This is likely to smooth out lead times and make it easier to adopt a lean approach to inventory management.
Whether or not your business has automated its inventory control, it is worth staying up to date with the latest trends. As more businesses move to managing multiple inventory tasks in a parallel process, small businesses will need to work hard to manage inventory efficiently and keep up.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.