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ASCM Insights

Inventory Management Automation for Bottom-Line Results

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Accurate inventory management can be the difference between making a sale and losing out to competitors. Customers are used to having a variety of purchasing options at their fingertips; if you can’t show them that you have the inventory they need, they’ll buy from somewhere else. Even worse, if you accept an order but can’t fulfill it, you’ll have a disappointed customer.

Manual inventory management is no longer a viable option in terms of speed or cost. The costs of sticking with a manual inventory practice add up to approximately $386,170 per year in a smaller operation. If you’re a large enterprise, that number grows to $3.69 million per year. On the other hand, 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. Digitally enabled supply chain ecosystems are a lifeline for the companies of the future. And they don’t have to be large-scale undertakings. Instead, start by focusing on three areas to streamline the supply chain: inventory management processes, mobile supply chain solutions and cycle counting.

1. Inventory management processes. Inventory fuels your organization, yet many companies still use manual inventory management processes, which lack accuracy and efficiency. They might choose low-tech practices because they are wary of added costs or just because they do not like change. However, with manual processes, accuracy rarely is higher than 60%.

Automated data collection with mobile inventory software can make a big difference. Mobile inventory technology uses bar codes to track inventory movements throughout company operations and the supply chain. This creates instant traceability paths, and records are always up to date with real-time information.

For example, U.S.-based construction company Continental Materials used to rely on manual inventory management processes. With paper-based systems, it often took weeks to generate final status reports, at which point the data was already outdated. Company leaders also lacked visibility into their warehouse inventory and shipping operations. It was clear an automated data collection solution was needed. The company chose a software data collection solution that interfaced with handheld scanners. In addition, company leaders integrated a mobile manufacturing workflow that gave workers the ability to complete parts against a particular work order. This addition automatically updated work orders, issued raw materials and processed time entries directly from a mobile device, leading to an increase in the quantity of finished goods.

By adopting an automated inventory management solution, Continental Materials improved inventory visibility, enhanced shipping efficiency and increased data accuracy by eliminating manual data entry. The previous paper-based system, which created more than eight hours a week of work, became obsolete, as work order completion records were run automatically.

2. Mobile supply chain solutions. Mobile enterprise resources planning integrated systems take inventory management to the next level. In fact, mobile solutions should be top priority for any organization that handles inventory or assets so that they can be as efficient as possible. When looking for a mobile solution, look for technology that:

  • automates inefficient manual inventory processes
  • provides low cost to entry and low risk
  • provides a quick return on investment
  • offers flexibility to meet both current and future needs.

3.Cycle counting. Another key component of inventory management is cycle counting. After all, these periodic inventory audits lead to higher accuracy and help drive down costs — unless, of course, you can’t trust the results. Manual cycle counts have been found to take approximately two seconds per item and only result in about 80% accuracy.

Automating this aspect of your enterprise can increase accuracy to more than 99.5%. Through a combination of bar codes, mobile apps and the latest handheld devices, organizations can automate cycle counts by item, location, fixed assets and more.

Consider NLMK USA, a global steel manufacturer. This business was having difficulty tracking and locating finished steel coils, which affected its ability to stage and load products onto trucks for timely delivery. In order to keep running a cost-effective operation, make the necessary turnarounds and fulfill customer needs, the company set out to find a new inventory tracking solution. Soon after implementation, the positive results became evident. The mobile inventory tracking system gave the company the ability to accurately store, track and stage the coils. Workers also were able to conduct cycle counts quickly and efficiently. The technology enabled them to reduce cycle counting labor time by 60%. What used to take half a day now equates to only two to three hours. Further, the use of mobile inventory solutions increased the company’s inventory tracking accuracy rate to 96% or more.

Get started streamlining

Digital transformation begins with an understanding of your current manual processes and where problems most often arise. Then, devise a plan to maximize digital capabilities for stronger operations. Streamlining your inventory management processes will give you more data to make better decisions and, in turn, help you be more agile and successful.

Take a deeper dive into this topic with our Certified in Planning and Inventory Management (CPIM). Earn your CPIM today!

About the Author

Robert Brice President and chief technology officer , DataMax Software Group Inc.

Robert Brice is president and chief technology officer at DataMax Software Group Inc., the parent company of Rfgen. He may be contacted via Rfgen.com.

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