In today’s consumer-driven business environment, manufacturers — particularly in the consumer goods industry — face increased pressure to keep up with demand and meet time-to-market expectations, while achieving increased productivity at lower costs. A key component to responding to this demand is achieving visibility throughout the supply chain. Visibility, from concept to consumer, streamlines operations and enables manufacturers to optimize production and inventory management, reduce costs and meet consumer expectations.
The Business Case for Supply Chain Visibility
The key benefits of supply chain visibility are effective and accurate forecasting and inventory management, which are essential to manufacturers’ success. On a daily basis, manufacturers need to ask themselves such questions as: What products have shipped? What’s the sell through? What’s the demand? Which products are on their way? How many are on hand? Is that enough? Which products need to be reordered? How do I best allocate what I have and what is coming in? Managing inventory levels can be a daunting task, but one that end-to-end visibility makes easier. In fact, according to a PwC report, forecast accuracy is a main driver of many manufacturers’ supply chain visibility initiatives.
If manufacturers overestimate demand, they are stuck with a surplus of products and associated costs. But, if they underestimate, they are faced with unplanned re-ordering and delays, possible penalties or worse, lost business. This can damage both customer relationships and profitability. Companies need to strike a delicate balance or be ready to face potentially catastrophic business outcomes.
Effective inventory management helps manufacturers master this balance, saving time and money, and enabling more accurate delivery times, which results in higher customer satisfaction. According to the UPS 2015 Pulse of the Online Shopper report, 50 percent of online shoppers cited the availability of an estimated delivery date as an important factor when completing their purchases. Effectively that means if manufacturers fail to report accurate dates because of issues with inventory management, the company risks a negative perception with 50 percent of its customers. With a clear need for supply chain visibility, manufacturers may then wonder how they can achieve it and what tools should be a part of their initiative.
How to Achieve Visibility
To achieve end-to-end visibility and master inventory management, there are a number of solutions that manufacturers should leverage. These technologies streamline communication and operations throughout the supply chain, and provide data that enables manufacturers to make informed business decisions and meet customer demand.
One such solution is radio-frequency identification (RFID), which uses electromagnetic fields to automatically identify and track tags attached to objects. Manufacturers and their partners — warehouse managers, retailers, and shipment teams — can use RFID, for example, to manage inventory without searching through each box of products during transportation. By simply scanning the RFID tag on a shipment, each supply chain partner can immediately download key information, including the number and variation of products within a shipment. This reduces errors, saves time and money, and allows manufacturers to better track inventory.
Also essential to any supply chain visibility initiative is fully integrated electronic data interchange (EDI). Integrated EDI enables manufacturers to leverage their existing technology to perform many tasks. For instance, the data collected by EDI provides visibility into which items are selling well, what sizes or colors of a product are most popular and where sales and returns are made. This enables manufacturers to forecast inventory needs and plan more efficiently to meet consumer demand. EDI also provides access to data regarding: What inventory is being produced within a manufacturer’s partner factories; when product(s) will ship; and, when it will be received by the retailer. By analyzing this data, manufacturers can better understand regional differences and improve distribution as well as order fulfillment.
Web Services and Application Program Interfaces (API) plug-ins offer another layer of data that enhances visibility. With the rise of eCommerce and web orders, APIs enable real-time connectivity between trading partners and their systems, and thus allows companies to see how customers are interacting with various ordering platforms and which products are trending and where.
To consolidate the data provided by RFID and integrated EDI, manufacturers should deploy an Enterprise Resource Planning (ERP) solution. ERP solutions centralize business processes and operations, providing a single, holistic view of all inventory. By having a single system with access to smart data such as that provided by RFID, EDI and API plug-ins, manufacturers can sense demand changes. They can then analyze the inventory availability and supply chain operations quickly, and respond accurately to ensure delivery times and customer expectations are met. By pulling together key data related to the product lifecycle and anticipated demand, ERP enables manufacturers to make informed business decisions.
With all these solutions in place providing visibility throughout the supply chain, a manufacturer can manage operations seamlessly and efficiently and meet consumers’ changing demands. For instance, say a footwear manufacturer is responsible for supplying shoes to several of its retail customers’ stores throughout the U.S. Using integrated EDI and API plug-ins, the manufacturer can see that there is a particularly high demand for rain boots in Seattle in the spring months. This can then determine which factories are producing rain boots and ensure all supplies necessary to keep up with the demand are available. Once manufactured, using RFID, each shipment of rain boots can be tracked from overseas or domestic factories, throughout the logistics path (ships, trucks, etc.), and ensure the right product in correct amounts arrives at the Seattle-based retailer’s stores by the required date. And with an ERP solution, if the demand for rain boots suddenly shifts to another region, the manufacturer can quickly respond by modifying its supply chain operations to meet the changing consumer need.
In today’s customer centric world where purchases can be made at the click of a button, consumers want products in hand as quickly as possible, and expect to receive accurate delivery dates when placing orders. This demand means that inventory is often considered by manufacturers to be their most valuable asset. Armed with the right tools, manufacturers can achieve supply chain visibility to enable effective and accurate inventory management and forecasting, and meet consumer demand.
Ajay Chidrawar is VP of Global Product Management at CGS.