It is all about the customer. Whether discussing product innovation, shop floor processes or IT investments, the underlying priority is likely to be related to customer alignment. Building customer relationships is the key to repeat sales, brand loyalty and products which are immune to commoditization and price wars. This customer focus applies to warehouse priorities too. And, despite increasing complexities in inventory management, software solutions can help manufacturers optimize processes to support a customer-centric approach.
Defining the Complexities
Warehouse management is increasingly complex. Not only are manufacturers inventorying larger numbers of SKUs, those products tend to have compressed life cycles with high tech components that quickly slide into obsolescent doom. A global supply chain providing raw resources, the need for traceability of components and strict regulations around storage conditions all add to the mounting list of pressures manufacturers face. The most challenging obstacle, though, is the increased demand for highly personalized products. How can a manufacturer possibly stock all of the variations of style, dimensions, materials, finishes and accessories associated with modern product lines?
Even business-to-business manufacturers and fabricators must contend with customers who want to submit customized specifications for industrial products, machinery and electronic parts. Creating unique products which can’t be easily knocked-off by aggressive competition is often the goal. Or, the objective may be to provide major accounts with extra attention. No matter the reason, the reality is an avalanche of Engineer to Order (ETO) and Make to Order (MTO) products. And, they all need shelf space, unique IDs and a place in the system.
Setting Priorities for Change
Organizations today have to make difficult decisions about priorities and determining the projects that merit phase-one funding. Inventory management is one of the most pivotal areas impacted by innovation, yet one that is often overlooked and underestimated for its value when it is time to allocate funds. But, pausing to recognize the significance of readily available raw resources, parts and components helps managers see why investing in smart inventory management solutions is a critical part of keeping customers happy.
When picking a starting point for IT investment, manufacturing executives often automatically turn to the shop floor, concentrating on industrial machinery, workflows, sensor technology and machine maintenance for improvement initiatives. It is easy to overlook the strategic role of inventory management and make the common assumption that the warehouse is just a transitional phase where goods wait to be shipped to their destination. That is hardly the case.
When inventory management is viewed through the lens of customer centricity, the relevance of available inventory, reliable safety stock and parts availability puts a new perspective on priorities. Lack of inventory means processes are delayed, eating away at productivity. When orders cannot ship, customers become angry, eroding loyalty and repeat sales. When service level agreements cannot be met because of missing spare parts, fines are levied and contracts revoked, proving that inventory should be a topic that everyone in the plant considers high priority.
Modern Assembly Demands
Advanced inventory management receives even more emphasis when the manufacturer must manage a large percentage of highly configured, personalized products. Operational tactics, like “hub and spoke” design and late-stage assembly, allow manufacturers to take advantage of modular design concepts with mix and match components. Various systems of a product can be assembled and stored. Final assembly can be postponed until the actual order is received. Then, the right finishes, accessories and details can be added to meet the customer’s exact needs. Assembly tactics such as this are becoming increasingly common as manufacturers cope with customer expectations for specialized products.
Fortunately, advanced inventory solutions help the manufacturer manage this process of storing and staging partially assembled products, components and compatible add-ons. Without highly flexible technology that can adapt to changing situations, chaos would be the new normal. No manufacturer can afford chaos, uncertainty, delays from confusion or gaps in communications from discrepancies in paper-based spread sheets.
Innovation in Thinking
Cross-docking is a practice in modern inventory and logistics operations. Cross-docking allows products which are unloaded from incoming trucks or rail cars to be automatically dispatched to the end destination — without the waste of being put in inventory and then shortly thereafter removed. By storing the products in a staging area or simply reloading them in another transportation vehicle, time and labor can be saved. In cases of less-than-truckload (LTL) shipments, cross-docking simply moves cargo from one transport vehicle directly onto another, avoiding warehousing. In some operations, a staging area can be used to sort inbound materials and store them until the customer’s outbound shipment is complete and ready to ship.
When a manufacturer makes its own components, cross docking capabilities help sync availability and demand, automatically matching the completed goods with open jobs or purchase orders that may be waiting for that component. Such tactics speed processes, streamlining activities and allowing the manufacturer to respond to customer expectations.
Using Scanners and Sensors in the Warehouse
Technology can also be used in the warehouse to improve inventory tracking, reducing errors and speeding pick and pack processes. Barcodes, optical scanners, RFID technology and sensors with GPS tracking can all be used to help warehouse personnel find and pull products from shelves. For manufacturers with thousands of SKUs, hundreds of possible versions, and multi-part kitting requirements, saving time on each order quickly adds up to major cost impact. Even more importantly, accuracy is improved, influencing customer satisfaction.
Next generation solutions can take the advanced inventory system up yet one more level. Wearable technology, voice activated systems and automatic sensor readings all help warehouse personnel concentrate on fulfillment, rather than computer tasks. Some industries even find benefit in deploying driverless forklifts operating on tracks which can quickly move through the warehouse, automatically stopping at correct bins and using robotic arms to pull products. Speed is increased, while also reducing safety issues.
Accuracy Improves Reporting
Improved accuracy is one of the most important ways technology improves inventory systems and helps improve customer satisfaction. Customers hate errors, especially errors in availability, inventory status and projected delivery. Inventory accuracy yields more accurate reporting and analytics, including predictive analytics. The ability to predict needs with confidence means a manager can tighten safety stocks, reducing the amount of inventory kept on hand “just in case” and can practice “just in time” strategies which optimizes space, time and cash flow, while still protecting the customer’s needs.
Accurate inventory of spare parts is also critical to aftermarket service, performing preventive maintenance and fulfilling service contracts with customers. Maintenance, whether on internal equipment or on customer-owned assets, requires inventory of replacement parts and routine consumables like lubricants, ink, filters and belts. Errors in inventory can be disastrous. Planning the projected need for replacement parts can be enhanced by smart Data Science using purchase data to project when replacements will be needed.
Warehouse management may seem like the last stop on the journey toward to the customer, so not critical. This is wrong. Inventory management is a critical part of customer centricity. It is complex, fraught with obstacles, and cluttered with expectations around product personalization. At the same time, it also offers a huge opportunity. When the warehouse management exploits technology, it can be an important differentiator. Inventory management can be a strategic part of the enterprise’s strategy to improve customer loyalty. The warehouse deserves priority status when allocating funds.
Mark Humphlett is Senior Director of Industry & Solution Strategy at Infor.