Jan 2, 2020
Where does your supply chain company sit on the Inventory Maturity curve?
Inventory or stock is the foundation of every supply chain operation. Like any foundation, you want it to be devoid of cracks so that you can focus on the business functions that matter. If you manage your inventory correctly, you won’t end up with vast amounts of capital tied up in excess stock or in a situation where you are at risk of losing clients due to stockouts.
One of the first steps to improved management of your inventory is the understanding of where you are on the inventory maturity curve at this point. Only then can you decide what to do. Depending on the type and size of your business, you may be happy where you are and not see the need to move any further. But for companies that are in a highly competitive landscape and are of substantial size, you may want to keep toe to toe with your competitors, at least if not overtake them in terms of technology and inventory management.
Stage 1 – Manual Inventory management (Static)
You are at Stage 1 when:
- Your Inventory data is managed and maintained in spreadsheets.
- There could be a repository for the sharing of information between team members.
- Data Analysis is mostly manual and time-consuming.
- No ability to gather intelligent data to provide predictive or proactive capabilities.
Challenges felt at this level:
- Employees spend more time ‘fighting fires’ than being proactive.
- Data is static and becomes quickly outdated.
- No intelligence from an ERP solution to assist with supply and demand.
- The lack of data to provide predictive analysis.
- No built-in alerts to signal shortages, excess, or stock availability at other locations.
- No single version of the truth as multiple versions/systems exist.
- There is a duplication of data resulting in the inefficient use of staff’s time.
Stage 2 – Enabled Inventory (Connected)
You are at Stage 2 when:
- Still using spreadsheets, but you’ve added custom-built macros to organize the data.
- These spreadsheets give you some visibility of your inventory levels.
- Data analysis is mostly manual.
- You may have a single repository for sharing information between employees.
- Still have no predictive or proactive insights.
Challenges felt at this level include:
- Limited functionality
- Insufficient data to manage your inventory effectively
- Macros in spreadsheets are sensitive to change and break easily
- New products and plans cause chaos and are impossible to plan
Stage 3 – Auto replenishment enabled Inventory (Reactive)
You are at Stage 3 when:
- You have dashboard visibility and other KPI’s.
- Your supply chain data is stored in an ERP system.
- Data intelligence exists to enable quicker decision making.
Challenges felt at this level include:
- BI tools within your ERP are not designed for Inventory management and do not take advantage of industry best practices.
- Requires your IT staff and other resources to make any small changes and to develop and maintain.
- No predictive or proactive capabilities.
- Limited collaboration.
Stage 4– Planning and forecast – driven Inventory Management (Proactive)
You are at Stage 4 when:
- Your inventory data is maintained and analyzed using software specially designed for inventory management.
- You have predictive analytics or artificial intelligence tools to help you prioritize tasks more effectively.
- Your inventory control data is in your ERP.
Challenges experienced at this level may include:
- Managing the change to a complete solution may cause issues
Stage 5 – Actionable Insights – driven Inventory Management (Predictive)
You are at Stage 5 when:
- Your Inventory data is maintained and analyzed using analytics solutions with features designed explicitly for Inventory optimization
- You can prioritize your most critical inventory issues using predictive analytics, AI, or machine learning.
- Connects multiple people, sites, algorithms, and disparate ERP systems to pull all inventory data into one place
Stage 4 or 5 is where competitive companies would want to be. These stages represent the best of both the present and future of the supply chain and incorporate AI, BI, machine learning, IoT, and more. Unfortunately, the majority of companies are still messing about in the first two stages of the curve and are missing out on the many business benefits that include:
- More available capital due to balanced inventory
- Increased sales due to improved inventory availability
- Staff productivity improvements. Staff have the time to do more
- Improved demand planning and forecasts
- Visibility of what needs attention so you can prioritize tasks accordingly
The exciting part about implementing technologies to manage your inventory is that often you can see an ROI as quickly as the 1st month. Your stakeholders and investors will be suitably impressed. Not only will you see improvements in your efficiency and bottom line, but your employees will be that much happier and more confident knowing they are working with data and reports that can be trusted.