Editor’s note: What’s on your mind? Submit a supply chain question to Editor-in-Chief Elizabeth Rennie at erennie@ascm.org. If yours is selected, she’ll research the topic and share the answer each month in the ASCM Insights Blog.

Reader A.R. asks: I understand that digital transformation is important to many aspects of supply chain management. But I’m curious about which particular areas really need to go digital versus those that could potentially be just fine sticking with a more traditional approach. Specifically, my team is brainstorming ways to improve our inventory management. How necessary is it for us to purchase expensive digital solutions? Is there a big difference between that and spreadsheets, manual counts, etc.?

Rennie: I was not at all surprised to receive a reader question about inventory management. In fact, my colleagues on ASCM’s expert data analytics team have informed me that inventory management topics are among the top 10 most Googled searches related to our field.

So, let’s start with the basics. A quick visit to the ASCM Supply Chain Dictionary — which has more than 350,000 copies and downloads in circulation and is truly the authority on all things supply chain — provides the following info: Inventory is any item that supports production, such as raw materials; activities, such as work-in-process; and service, such as spare parts. It’s worth noting that inventory can also include a supply chain organization’s buildings, equipment, fixtures and so forth.

Now that we have a general understanding of inventory, consider the purpose of managing it effectively … which is, of course, accuracy. This important metric is usually measured as the percentage of items with inventory levels that fall within tolerance — typically 95-99%, depending on an item's value, per the dictionary.

Ok, so how can digital solutions help supply chain organizations achieve this level of accuracy? In a recent article from the ASCM Insights blog, author Robert Brice writes: “Manual inventory management is no longer a viable option in terms of speed or cost. … Research shows massive time and cost savings from just seconds-faster workflows. Plus, enabling digital inventory management drives more efficiency and productivity and can increase accuracy through real-time visibility.”

Brice goes on to note that digitally enabled supply chain ecosystems don’t have to be large-scale undertakings. Instead, you can start by focusing on just a few key areas: First, look into automated data collection with mobile inventory software. Mobile solutions use bar codes to track inventory movements along instant traceability paths while creating accurate records. Second, tap into integrated mobile enterprise resource planning systems to automate inefficient manual inventory processes, such as picking and packing. Lastly, ditch the manual cycle counts. Instead, use a combination of bar codes, mobile apps and handheld devices to automate cycle counts by item, location, fixed assets and more.

Now, there are always challenges — even with digitally enabled systems. Software and automation have their limits, and all of them require talented humans to work them properly. For example, if products aren't organized and tracked well, this can lower productivity, disrupt the customer experience and add unnecessary costs. Furthermore, economic shifts, time of year and more can affect demand for specific products, which is why inventory management systems must have the capacity and capability to track trends over time.

Working through the challenges can be tricky, but it’s definitely worth it. Well-managed inventory offers considerable benefits, starting with bottom-line savings. For instance, knowing where products are and how many are available means organizations can pull strategically when orders are placed. Likewise, balanced inventories ensure that organizations can maximize their cash flow capabilities to free up funds. And of course, good inventory management keeps customers happy because you’re able to meet their needs with speed and precision.

Hopefully, this gives you a good understanding of the value of digital inventory transformation. To take the next step on your path to digital, I can’t encourage you enough to check out ASCM’s industry-leading CPIM program. The Certified in Planning and Inventory Management designation enables you and your team to master sales and operations planning; demand and supply planning; scheduling; risk management; and, of course, technology-supported inventory management. Enjoy the journey!

Submit your supply chain question by emailing Editor-in-Chief Elizabeth Rennie at erennie@ascm.org.