Automated inventory management can save time and money for OEMs

By Paul Przyby, Senior Vice President of Sales and Marketing of Optimas Solutions

Traditional vendor managed inventory (VMI) programs track part ordering, fulfillment and replenishment in construction equipment manufacturing facilities. But a genuinely automated, end-to-end system is more significant in scope and benefits than just managing parts. 

Modern inventory management offers a strategy that elevates supply chain assurance, increases facility efficiency and positively impacts financial performance. These tech-enabled processes also enhance supplier-distributor collaboration and align both partners by:

• Illuminating and adapting to changes in demand  
• Offering visibility into consumption patterns, on-hand inventory and locations
• Providing data to optimize quantity, logistical and delivery decisions
• Automating replenishment based on individual facility requirements

Digitized inventory management ensures you can make data-driven decisions with current inventory numbers that are not vulnerable to mistakes, tardiness, miscommunication or multiple data sources. In turn, automated solutions help accurately anticipate required stock levels and bring your supply chain planning into focus.

RELATED: Why fastener redesign is often necessary for construction equipment

Still, some equipment manufacturers cling to legacy inventory management processes. Familiarity breeds comfort but remaining loyal to those routines are likely doing you few favours. Before embarking on a new solution, its best to get more acquainted with what fully integrated inventory management can look like, how a digitized system reduces cost and some small steps to get started.

Tech-enabled inventory 

Managed inventory employs a partner (think full-service distributor) that’s responsible for all things related. This resource develops a custom program to ensure stocking levels match demand and inventory is delivered when needed. It’s about streamlining your supply chain, reducing costs, having higher visibility into your parts consumption and reallocating human resources away from slow, manual, error-prone work to more quality-focused, value-added responsibilities. 

Partner requirements include:

• Digital tools to meet individual plant requirements: The ability to easily implement technology solutions that meet different workflow and space requirements at one or multiple manufacturing facilities.
• RFID and EDI: Proven transmission protocols that assure the partner’s network and support data flows freely and securely to and from manufacturing and distribution locations.
• Integration into existing ERP and SCM platforms via web tools — It’s critical to ensure all aspects of production are working with the same data through a single source of truth.  
• Security: All data transactions moving between the manufacturer and the partner must be secure and can’t be compromised.
• Accountability: The partner should demonstrate multiple ways to understand and attribute inventory usage.
• Reporting: Visibility throughout the managed inventory process starts with good reporting that is designed to meet a manufacturer’s unique needs.
• Control: The partner needs to demonstrate that manual inventory practices can be moved to automated replenishment processes at a pace that’s comfortable for the manufacturer.

Reduced costs

A recent study found most companies devote 20 per cent to 40 per cent of their overall working capital to inventory alone. Keeping those costs down is critical to maintaining cash flow with such a sizable percentage of funds invested in inventory. Automated inventory management facilitates offer better stocking levels, and less E&O (Excess & Obsolete), greater control over cash flow and fewer people needed to manage fastener stock.  A tech-enabled solution can reduce costs in many ways and equipment manufacturers are starting to understand the importance of:

• Better forecasting via technology: Using RFID technology to manually or automatically submit replenishment orders means that inventory may be monitored in real-time. As a result, procurement and supply chain professionals can manage inventory levels to production requirements.
• Working smarter with business analytics: Technology available today allows you to capture and use data and modelling based on real-time and historical consumption patterns. The best forecasting uses a mix of quantitative and qualitative data to guide more accurate inventory management decisions. This foresight allows you to see where demand and usage comes from and plan accordingly. You can see where fulfillment levels are, and adjusting production up or down based on demand, parts availability and lead time.
• Refocusing human capital: With a manual scanner or an automated replenishment program, it will take less time, teammates and process to maintain appropriate inventory levels. These productivity gains drive soft costs down and offer an opportunity to re-allocate people to roles with greater impact on production.

Getting started with an inventory management system 

The first step is to identify the core pain points of your current solution and map them to the benefits a digitized system provides. Here are the top five questions to ask:

• On a scale of 1 to 10 how accurate are your part counts?
• How long does it take to go from count to replenishment?
• Has production slowed or stopped because of low inventory or stockouts in the last 12 months? 
• Has E&O inventory negatively impacted your company’s balance sheet in the last three years?
• Is your current supplier doing anything to improve your inventory management process?

Answers to these questions are a first step toward achieving the benefits associated with a modern inventory management solution. 

Digitized inventory management can make your supply chain more efficient and resilient to disruptions, develop higher visibility into your part consumption, improve forecasting and help you reallocate resources to more productive responsibilities.

Tech-enabled management has promising benefits for manufactures in the construction equipment arena. Among them are savings in time from a labour and administrative standpoint, increased supply chain assurance and greater confidence in data-driven decisions. 

Today’s supply chain solutions and the right partner to plan, implement, report and fulfill orders can elevate efficiencies and help manufacturers be more competitive in a very demanding marketplace.