According to a global study commissioned by Automation Anywhere, workers waste more than 40% of their time on manual tasks, including data entry and updating errors from manual entry.
That means if you have a team of at least three people working on inventory management for manufacturers, that’s a waste of 48 hours every week!
Even just one team member managing the task of inventory management will on average lose 16 hours per week — 2 entire business days —performing manual processes that could be automated for speed and better accuracy.
Regardless of living in a world with technology literally at our fingertips, inventory management in the manufacturing industry is still predominantly stuck with pen and paper tracking, Excel spreadsheets, manual data entry, unknown percentages of errors, and low-to-zero visibility of real-time data.
FinanceOnline.com even reported that nearly half of small businesses don’t track inventory with automated systems, or don’t track their inventory at all.
With the amount of time wasted on manual inventory management tasks, it’s not surprising that so many SMBs neglect proper inventory management. Nevertheless, companies that fail to manage their inventory risk overspending on operating expenses and will often overpromise and underdeliver to customers.
If you’re willing to re-examine how your business takes on inventory management, then get ready to learn the five inventory management secrets.
Secret #1 You Do Not Have to Follow the Inventory Spreadsheet Tradition
If you’ve taken on the mantle of Inventory Management Leader, chances are the job was passed on to you with a bunch of spreadsheets.
Guess what? Just because your business has always used manual-entry spreadsheets doesn’t mean you have to keep doing it.
Besides the wasted time with manual data entry — remember, you’re losing two days every week to manual tasks — there are other problems to consider, such as human error and inconsistent entry styles.
Not to mention that creating spreadsheets for your unique business processes may not be the best fit. You’re no doubt using spreadsheet programs that were never really designed to track this type of business information. Sure, you’re making it work, but at the cost of 40% of your work week for information that isn’t even up-to-the-minute accurate.
Secret #2 You Can Make Inventory Changes Almost Immediately with Real-Time Data
Instead of only realizing you have inventory problems after audits, wouldn’t it be nice if you could know all your key inventory tracking system data in real-time before big problems happen?
That’s the main benefit you get from automating and digitizing inventory management systems.
After all, digital inventory management systems are robust and include additional elements for tracking, demand forecasting, inventory auditing, and more. For example, by including materials requirement planning (MRP), your inventory management system can do the following:
- Keep accurate track of all inventory and material components currently on hand
- Verify when new materials and inventory items need to be ordered
- Reschedule production and delivery orders based on the above two factors
Additionally, inventory management systems that also incorporate or work side-by-side with product lifestyle management (PLM) systems offer manufacturers even more visibility into how their inventory relates to the products they create.
For instance, with PLM, manufacturers can see how every department contributes to production, including how inventory management either speeds up or slows down different parts of the production process. Recognizing that certain production activities can be streamlined by improving supplier relationships, increasing the inventory of materials or components on hand, or changing how components are used, empowers manufacturers to use their inventory more efficiently and produce finished products at scale to get them to market faster.
No matter how your manufacturing company does business, you can develop an automated inventory management system that addresses the data points that matter most to your bottom line. Incorporating MRP and PLM, among other tools and strategies, can show all the data points in live time, allowing you to pivot business practices quickly to address those issues.
For example, imagine that by incorporating PLM practices, you had an automated dashboard that kept track of every supplier and vendor you worked with, provided a digital vetting system, and updated key points about risk factors related to using those suppliers. With that information, you could source the best supplier and vendor options to reduce lead times and lower the risk of delays.
Real-time data provides real insights into the inventory your business stores, ships, and orders. Likewise, it can reveal important information about the processes your business uses to manage that inventory, conduct demand forecasting, and balance out your inventory supply and demand needs.
When you have a system that lets you analyze the data that matters most to your business, you gain the power to take charge and scale your business for year-over-year growth.
Secret #3 You Do Not Need Multiple Inventory Data Systems When One Will Do the Trick
One of the key benefits of digital inventory management software solutions is the ability to use all that gathered data to forecast accurately and reduce costs. Of course, this works best when the data all comes from one source, but that is not often the case with most businesses.
Due to budget and time constraints, many companies tend to purchase software solutions as needed, so it’s not uncommon to get to the point where your business uses multiple systems to manage data related to inventory.
However, more software solutions can often cause more problems.
For one thing, not all software systems can communicate with each other, so sending data back and forth between systems, or having the systems cross-reference the data, may not be possible. Such inconsistencies lead to inaccurate orders, running out of stock of on-hand materials, and the inability to provide accurate production schedules or lead times.
Next, just because one system is kept up to date does not mean that all systems are kept up to date. Different team members work differently, so they may not update information on the same schedule. If updating your data relies on other teams updating their data, it just becomes an endless cycle of waiting and updating information that will probably be out of date when you need it.
"Bending" software programs that were never designed for inventory management, such as QuickBooks, can also lead to significant problems. Not only does inadequate software fail to do the job, but in general it's not robust enough to verify materials on hand versus materials that need to be ordered (reasons why you need MRP). Also, "bending" software to make it work versus taking the time to obtain the right solutions for your needs will often result in far more additional costs down the road (referred to by industry experts as 'tech debt').
Additionally, sometimes companies have specific challenges that no one off-the-shelf system can solve. Companies think that if no one system can solve it, then the answer must be to buy multiple systems. But this is not the best option.
If your company doesn’t fit inside the off-the-shelf box, break out of that box and look into a customized software solution.
Getting a single system built to collect, own, and translate your data into actionable insights will bring you significant ROI in the long run. Furthermore, when you work with a customized software vendor, they create inventory management solutions that give you everything you need and nothing you don’t.
Secret #4 You Can Get Real Visibility of Your Supply Chain with the Right Data
As not all manufacturers have embraced the digital transformation revolution, businesses throughout the supply chain have just come to accept that data visibility is wishful thinking.
But you don’t have to accept that.
Not only can you gain real visibility of your supply chain with the right inventory management solution, but you can use that software and data to give your business a competitive advantage.
When you upgrade to a robust digital inventory management system, you can set up easy-to-read data dashboards that give you up-to-the-minute information about shipping logistics, lead times, delay expectations, demand forecasting, and everything else that matters to your bottom line. Plus, it improves your customers’ experience with your brand.
If your company sets itself apart as a manufacturer that can provide accurate information and deliver on its promises, customers will be more likely to work with you than with your competitors. With that kind of ROI, your inventory management software is no longer an expense. It’s a business asset.
Secret #5 You Can Upgrade Your Legacy Inventory Management System Faster Than You Think
Changing your inventory management system from completely manual processes to digital is a big decision, which means you need software that fits your business needs and your timeline.
For small to medium businesses, buying off-the-shelf software may seem like the faster choice, but recognize that such software is made to serve the masses. If your business has unique inventory needs, off-the-shelf software might not have the capabilities your business requires.
Customized software solutions are often the best option for businesses that have highly specialized needs and business processes. If you are an SMB thinking that you don’t have the time or capital for customized solutions, think again!
Many customized software vendors work specifically with SMBs. These vendors often provide industry-specific business consulting services along with tech recommendations and development. They can work within a set budget and meet your deadlines to get you up and running.
You can learn more about comparing off-the-shelf versus customized software solutions by reviewing this article.
Benefits of Mastering These 5 Secrets of Inventory Management
It’s time to take your inventory management processes into the 21st century, and the above five secrets will get you on your way.
Just in case you need extra motivation, check out these metrics about the benefits of automated inventory management systems:
- Save 20-50% on warehouse costs (WSINC.com)
- Increase stock use efficiency by 30% (FinancesOnline.com)
- Boost overall productivity by 25% (FinancesOnline.com)
Want more proof? Review this AltSource case study about how a national supplier of custom spice blends updated its inventory management system and reduced written-off inventory losses by 99% within one year.
If you still have questions about what you can do to improve your inventory management system, feel free to reach out to the experts at AltSource: firstname.lastname@example.org