Using Information Technology
in Inventory Management
New generations of shopping
options have come to the forefront of supply chain management through b2b
e-commerce, connective e-commerce and m-commerce, making supply chain
management a concern for many organisations. A brief definition of these areas
of supply chain management is:
- E-commerce refers to online
marketing, advertising, purchasing, and selling products or services. It
includes the exchange of money and information to enable these
transactions.
- M-commerce or mobile commerce
involves selling and purchasing products and services using wireless
handheld devices like smartphones and tablets.
However, effectively
managing data and extracting insights requires specialised skill sets. Without
the right expertise, technologically driven inventory management can be
counterproductive for organisations. It is only beneficial when utilised
expertly and appropriately.
The Evolution of Technology
The rise of e-commerce is
heavily reliant on technological advancements in inventory management. This
shift has blurred the lines between traditional retail and online order
fulfilment, highlighting the importance of integrated inventory systems across
various sales channels.
The evolution of e-commerce
has led to a hybrid model where physical stores incorporate e-commerce
platforms. This integration is only feasible with a comprehensive inventory
management system that seamlessly tracks inventory across different retail channels.
Due to the rapid rate of
change, keeping up with technological advances has historically been a
challenge for organisations. However, advancements are now more accessible to
all, leading to a complete transformation in organisations' operations.
Organisations now have a
wide array of technology options, allowing them to tailor their inventory
management systems to suit their needs without incurring excessive costs.
Technology's scalability enables organisations to adapt as they grow,
potentially creating new business models.
Despite the variety of
technologies available, the primary goal remains consistent: organising,
controlling, and providing inventory information. Automated inventory
management systems utilise tracking technologies like barcodes and RFID to
streamline information collection and goods flow.
These systems can be active
or passive, with active systems offering automatic detection, tracking, and
analysis capabilities. Innovative technologies and applications are crucial in
advancing inventory management practices, although manual data entry can
introduce errors. Nevertheless, these systems can be a flexible and valuable
option for smaller organisations.
Each process, whether
conducted physically or electronically, has its unique nuances. This is
especially evident when comparing competitors offering the same products but
having different operational approaches. Furthermore, the peculiarities within
various industries contribute to the diversity of processes, even extending to
third-party logistics organisations.
Supply chain management
software has been designed and evolved to manage and enhance the exchange of
information and data across various vital supply chain partners to attain such
outcomes as:
- Just-in-time procurement.
- Reduction of inventory.
- Increase in manufacturing
efficiency.
- To meet customer needs in a
time-sensitive fashion.
Organisations can now
leverage technological advancements to create comprehensive supply chain
solutions that optimise operations, improve productivity, and address potential
bottlenecks in the supply chain process. The availability of real-time information
plays a crucial role in increasing the supply chain's efficiency and
effectiveness.
Manufacturing
The evolving technological
landscape and shifting customer expectations have underscored the significance
of integrated supply management, particularly for manufacturing organisations
aiming to expand their customer base. Digitalising business operations is no
longer just an added benefit but a fundamental requirement in today's
competitive market environment.
Manufacturing organisations
rely heavily on their supply chain partners to deliver products, with
stakeholders such as manufacturers, suppliers, retailers, shippers, and
distributors playing crucial roles. The supply chain culminates in the delivery
of products to the end customer, highlighting the importance of collaboration
and efficiency among all involved parties.
To streamline the overall
production process, a manufacturing organisation must clearly understand the
status of products in production, anticipate any potential issues or delays,
and adjust production schedules accordingly. Technology integration can enhance
transparency throughout the process, giving manufacturing organisations greater
control over product data and information flow across the supply chain.
Managing inventory levels
optimally poses a significant challenge for all manufacturers. Excess inventory
can result in financial risks due to waste and increased working capital
requirements. In contrast, insufficient inventory may lead to production disruptions
and business losses from stockouts.
Manufacturers can establish
flexible business processes that adapt to varying demand scenarios by
leveraging technology. Analytics can help manufacturing organisations achieve
their financial objectives by managing inventory and sales orders effectively.
Through IT-enabled real-time
information sharing, manufacturers can enhance collaboration and partnership
efforts with critical suppliers. Improved visibility into supplier and
distribution processes allows manufacturers to monitor activities across the
supply chain more effectively.
This valuable information
enables manufacturers to make informed decisions, anticipate future material
demand patterns, and reduce costs through strategic decision-making in
procurement and supplier contract management.
Ensuring timely material
delivery is crucial for maintaining high customer satisfaction levels,
increasing customer retention, and generating repeat business. Technology
solutions play a pivotal and vital role in enhancing the delivery speed and
keeping customers informed about the status of their product deliveries.
Implementing processes
involving customers throughout the manufacturing journey, from order
confirmation to fulfilment, can empower them to track and trace their orders
and control their experience. This enhances their satisfaction and reduces the
workload on the manufacturer's customer service team.
Establishing effective
communication channels with logistics service providers can provide real-time
updates on inventory shipments and product deliveries, helping to streamline
the manufacturing process and minimise delays and costs associated with production
obstacles.
Leveraging technology to
gain comprehensive visibility across all organisational functions and utilising
real-time decision-making data can significantly improve manufacturing
efficiency. Incorporating technology into supply chain management can result in
lower product costs, reduced working capital requirements, and, ultimately,
higher customer satisfaction.
Warehouse Management
While different
organisations provide blueprints for key processes using barcoding and radio
frequency controls, these standardised methods only apply to reading and
recording data. The actual handling of physical materials and the specific
procedures followed in each warehouse are distinct and tailored to the
individual business. This is driven by factors including:
- The magnitude of the warehouse
operation.
- Storage capacity.
- Temperature.
- Order profiles.
- Legislative requirements.
- Organisational culture.
- Volume of goods moving through the
facility.
The different processes that
occur within a warehouse management system are fundamentally the same across
many warehouse operations and typically consist of the following:
- Receiving.
- Put-away.
- Picking.
- Packing.
- Dispatching.
- Returns.
- Value-adding.
The complexity around
handling value-adding processes and the changing nature of component products
in and out-of-shelf locations can be daunting. Over the years, systems have
evolved to assist. Yet, many companies find that recording value-adding components
may be incompatible with how their logistics system or WMS is set up.
Inventory Management
Inventory management is a
challenging and crucial task that involves constantly checking and verifying
stock levels. It is never complete, as the inventory position continually
changes. However, it is essential for the successful operation of any retail or
manufacturing organisation. When issues arise with inventory, they can
significantly impact the organisation in terms of cost and inefficiency.
Fortunately, technology has
evolved to help address these inventory management problems. The goal is to
eliminate the manual aspects of inventory management that are slow and prone to
errors.
In the past, the traditional
manual approach to inventory management meant that accuracy was never achieved.
The actual state of the organisation's inventory needed to be accurately
represented. Staff had to manually compare incoming and outgoing orders and
physically count the inventory to identify and correct errors.
Due to the nature of manual
inventory counting, it could not be done continuously and in real-time. It was
typically done during pre-determined periods set by the organisation. This
manual process made it difficult to verify the accuracy of the inventory, and
mistakes were inevitable, especially when the task was repetitive and
laborious.
However, technological
advancements have introduced RFID technology, which can revolutionise inventory
management. RFID tags and scanners automate inventory management and
continuously track all items entering and leaving a warehouse. Each time a
product is moved, its movement is logged, allowing for precise tracking of its
location.
For organisations that offer
services in addition to goods, RFID technology can also be invaluable for asset
inventory management. It eliminates errors, ensures accuracy, enhances customer
service, and enables better decision-making.
Organisations rely heavily
on inventory management decisions enhanced through insightful data analysis.
This approach saves time and equips managers with the necessary tools to
improve overall business decision-making processes.
Technologically driven
inventory management enables organisations to collect and analyse data,
providing valuable insights into product trends and demand patterns. This
data-driven approach is crucial for making efficient sales decisions and
leveraging big data in the future.
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quality, efficiency, and effectiveness of their product and service supply to
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