Inventory health can be deeply impacted as day-to-day manufacturing operations involve thousands of transactions being processed. When system updates from enterprise resource planning (ERP) system do not happen on a real time basis the results often lead to inventory discrepancies. Even daily reconciliation of all transactions may allow for merely adequate results.
The key to any successful manufacturing company is to understand the health of inventory whether finished goods, work-in-process, or raw materials. Just as a physician has a variety of diagnostic tools to assess the patient’s health, best-in-class demand driven supply chain technology can run the “bloodwork” (inventory) of manufactures to determine multiple factors.
One test, almost a kaizen event, could be whether the right part is available at the right place. Other metrics include a determination if the manufacturer carries the right amount of inventory to meet committed customer service levels. In the best of lean principle, poor inventory health can be evaluated if inventory becomes redundant due to expiration dates and if so, when. Another consideration would include how lot or serial controlled items are tracked from suppliers back to production.
Even though companies want the Inventory to stay within a manageable band, in reality it fluctuates dramatically for several reasons such as unexpected spikes in customer demand, deterioration of supplier performance, quality related issues, and production related problems.
Ultriva’s early warning system built into the software ensures inventory health because it is driven by business rules defined by each business. It can also be tailored to product groups, customer or supplier segmentation, by production cells, by supermarkets or warehouses.
Typically, in most companies, the buyer is responsible for 500-1000 parts for sourcing and procurement. It is very difficult to analyze these 1000 parts on a daily basis, determining the actual risk of stocking out. Ultriva’s inventory health highlights the exceptions (5%-7%) of parts that are at the highest risk. Buyers then focus on those 50 or less parts and drill down looking at supply chain visibility; this targeted approach ensure that the necessary corrective actions can be taken.
Viewing the high risk parts and identifying those which have increased demand, allows planners to resize the inventory, meeting the new demand in real time. Similarly, if the parts are getting to a high risk state because of poorer supplier performance, buyers can reset the lead time and resize the inventory when necessary.
Inventory health drills down to material status which highlights 15, 30, 90 days demand changes, projected stock outs, and identifying past due orders and on-hand trend chart.
Inventory of raw materials or finished goods is quantified by thousands of SKUs, particularly in raw material inventory or spare parts inventory. Often these data are exponentially greater when compared to Finished Goods (FGs.) Among CPGs (consumer packaged goods companies) even FGs have tens of thousands of SKUs which determine inventory health.
Because inventory has direct economic value, the need to manage and to have control over the inventory is essential, mandatory, and a key decision-making factor in technology selection. Inventory health is a physical process as well as a management process. Inventory transactions and data systems are the tools needed to manage inventory health.
Inventory Health Uniquely Defined
Every company’s goals and metrics are different. None of the new technology providers in the demand driven supply chain space provides customizable rules to measure the health of the inventory. Ultriva is unique in recognizing that even within a single facility, the rules could be different by product family or product category, or even at the individual part level.
Just as a physician weights a patient, takes the blood pressure and pulse, Ultriva is equipped with sophisticated tools that not only diagnose the current state of inventory health, but predict what challenges are likely to follow without corrective action. Sadly, just as get-thin-quick schemes are advertised on late night television, there are technology imposters who fail to recognize, address, and solve the unique standards set by each company. Patients are advised to check out a physician’s credentials; the same investigatory rigor should be applied in finding appropriate solutions for inventory health. After all, the Hippocratic Oath says, do no harm; the same must be true for inventory health.