Finding Inventory through ERP in a Business 4.0 environment

Inventory Visibility is the degree to which an enterprise has the real time information about the network wide inventory. It refers to where the material is being supplied, received, is in transit and ultimately what the overall demand looks like. Such a clear view aids in better product availability, inventory utilization, improved service levels and finally higher sales. ERPs are the most popular yet not most efficient systems when it comes to tracing inventories. It is to be understood what stops ERPs from running at their optimal peaks and what the readers can do complementarily to achieve inventory visibility. If we add another variable called Industry 4.0 to the equation, we look at barrage of data flowing in an intelligent, automated and agile way through the cloud. With the introduction of cyber physical systems, the ERPs which act as information backbone in an enterprise need to be tuned or advanced to keep pace with exploding number of business transactions.

Barriers in attaining inventory visibility

Increasing product lines, product mixes and extended supply chains lead to huge volumes of data being generated each day. The data pertains to customers, sales, suppliers, procurement, inventories etc. The levels of efficiency of data handling tend to droop as the collaboration begins to dwindle as we move to the ends of the supply chain. Fourth stage smart factories are communicating with machines and people alike through Internet-of-Things and hence there is a need to process raw data to meaningful information quickly for making informed decisions. Certain effects which are very evident in inventory mismanagement through systems are –:

• There is an inherent latency in reaction to the same information by supply chain members which is the main source of this haziness. Not providing timely access to information to all members impacts the following –
• Demand forecast accuracy
• Incorrect mapping of demand to supply and thus stock outs
• Over production leading to capital blockage
• Poor pricing strategies resulting in diminished margins
• Inflexible supply chain does not allow the output to be adjusted in a dynamic way –
  • Constant output machines can always lead to bottlenecks and ultimate improper inventory generation
  • Frequent break downs may prove to be a hindrance in knowing the true inventory picture
• People issues
  • Lack of executive buy-in and trained staff hinders the smooth flow of information in the form of delayed data input, processing and reporting
  • Inventory monitoring check points – Consultants hired to identify and analyze the correct the junctions where information is to be recorded have a myopic view
• Technology
  • Use of legacy systems with ERPs leading to incorrect meshing of information sets
  • Use of disparate ERPs with distinct data sources, incompatible data formats
  • Lack of compatibility or features which can facilitate communication between assets and people

Issues with ERPs

Enterprise resource planning aims to integrate all the primary and secondary activities across an organization. This means linking all the internal and external stakeholders to a common database. The expected end benefits of this deployment are improved access to data, reduced process complexity, better business analytics, improved reporting etc. to name a few. But generally ERPs fail to keep their promise of providing eyes on the inventory floating in the network because –

• Design issues like wrong module frameworks, insufficient software/hardware capacities, data leaks
• Compatibility issues like members trying to make information flow over distinguished systems leading to incorrect data meshing
• Conflicts between transformation goals and business objective goals of on-time delivery and cost reduction
• Technical issues like use of single or multiple ERP systems for a particular business function
• Lack of fourth stage features like supply chain control tower, analytics, collaborative tools, high performance computing etc. is also a reason

Use Cases

A client, who is a leading oil field services company, has historically operated in Make to Order (MTO) and Engineer to order (ETO) environment while providing tools and services to its customer base. The client and its customers had traditionally operated in a custom Engineer/Make to order environment. Now due to changed market conditions and advances in exploration technology, client had to rethink its ETO/MTO strategy and move towards a more standard product offering and segmented fulfillment strategy as: Make to Stock (MTS), Assemble to Order (ATO), Make to Order (MTO), and Engineer to Order (ETO). TCS provides a solution to identify low visibility, sub-optimal inventory areas in order to drive out excess inventory through a series of data driven diagnostic techniques mapped in the ERP system on premise. The client would experience alignment between demand and supply planning along with accurate Available-To-Promise dates. This is how the client could improve on the inventory visibility front.

Potential Solution

Client would be able to target a high level of inventory visibility by ensuring certain enhancements to the existing ERPs –

• ERP solution implemented must be able to automatically combine all disparate data sources across the length of the supply chain with multiple integrators to select from in order to create a continuous data bridge
• ERP solution should have an alarm system whereby critical alerts on inventory status are reported real-time enabled through control towers which have inbuilt business models and decision making capabilities to order replenishments especially in Vendor Managed Inventory scenario.
• Optimizing the inventory storage locations and reducing the inventory data points inside own enterprise using multi echelon inventory optimization involving data analytics, segmentation and elimination techniques
• On-boarding external members like contract manufacturers, co-packers, 3-PL to record inventory in homogenous ERP systems bearing high memory and computing power so that there is no data pilferage or leakage
• Moving towards more advanced technological solutions like mobile devices / GPS tracking, RFID, cloud-based connectivity to track and trace inventory across warehouses and while on the move
• Using Blockchain enabled smart contracts to lock in inventory numbers and prevent double booking, ghost inventories in the value chain