Why Lack of Inventory Transparency May Be Hindering Your Business Growth
Calculating how much inventory to keep on hand can sometimes feel like a Goldilocks story. Too much inventory and you’re left with wasted product. Not enough inventory and you’re left with unhappy shoppers and lost profit.
Oftentimes, the amount of inventory on hand is a result of supply chain issues, of which there has been no shortage of over the last few years. Ports with queues a hundred cargo ships long, supply shortages worldwide, and rising international tensions have placed an enormous amount of pressure on the supply chain and created a turbulent economic environment to say the least.
A stressed supply chain means that the normal challenges that companies experience with supply chains are amplified. Conditions brought on by the pandemic have placed even more emphasis on the importance of last-mile delivery. Getting the product to the customer’s doorstep has now become a permanent part of the supply chain. In fact, 68 percent of consumers said they will continue to buy essential products online, a dramatic change in consumer habits.
With so much emphasis on e-commerce, tracking a product all the way through its journey is essential for customer satisfaction and ensuring the profitability of your company. But most important, thorough tracking will allow you to have better control and visibility into the amount of inventory you need.
What’s at Stake
As a longstanding member of the warehousing industry, I understand how supply chain management can affect every other part of your business. Much of the value of your business lies in the amount of product you’re able to deliver to customers at the right time. If you have an inaccurate picture of where your goods are or how much of a product is on hand, then you have an inaccurate picture of your business’ worth.
Some of the most common issues that arise when there's a lack of transparency into a company’s supply chain are excessive waste and costs, missing goods, and customer churn. All of these factors can have detrimental effects on productivity and your bottom line.
When you don't have your finger on the pulse of your supply chain, products and goods can fall through the cracks, causing inventory issues. With shipping delays at major seaports, a shipment stuck out on the bay can cause delays throughout the rest of your supply chain.
Losing track of product is losing track of your money. Dealing with thousands of units of a product also opens the door to a slew of security issues. How would you know if a shipment is stuck in the bay or if products are being lost through theft when there's no efficient tracking system in place?
It may come as a shock to learn that many major ports — including the largest port in the Western Hemisphere, the Los Angeles port — have yet to go digital. Most ports are still stuck in the paper age. Oftentimes, the ports lose track of essential records and thereby entire containers.
This means that you have to take extra precautions to carefully track shipments and document all movement of your product. Digitizing all of these records and implementing automation where possible will help to control these issues. Luckily, there are countless new pieces of technology out there to help you do so.
Increasing Inventory Visibility
The main problem in supply chain management is a lack of inventory visibility. Luckily, there are plenty of new technologies out there created for exactly that issue. One very useful one is radio frequency identification (RFID) and barcode technology.
RFID uses two components: a tag and a reader. The tag is placed with a unit of product, and then as it moves through the supply chain a reader picks up the tag and records where the unit is in the process. Barcode readers work very similarly, but instead of a tag and a reader, the unit has a barcode on it and a scanner is used to record where the product is.
Using RFID and barcode scanners can help paint a detailed and accurate picture of how much product is where and how long it takes to move. These scanners can be extremely beneficial when paired with something like a digital twin, which is essentially a virtual model of a particular process or facility.
Digital twins represent a complex program of gathering real-time data to build a simulation of a real-life process, pulling data from every corner of the environment. For example, in a warehouse, digital twins can replicate all of the activity throughout the warehouse. The program can also pull from cloud data, automate communications, and employ Internet of Things technology to gather a more accurate, real-time picture of the warehouse.
The more data the digital twin can pull from, the better the visibility into product movement will be. These technologies can also tighten up security as they allow you to see exactly where a product is and where it may have gone missing.
As a business owner, you want to stay on top of your inventory. However, due to the increasing pressures put on the supply chain over the last couple of years, sometimes inventory management is out of your control. The good news is there are many tools and technologies at your disposal that can help illuminate the factors that cause a lack of inventory and overall help your bottom line.
When looking at automation technology, look for ways to pair tools that help one another like with RFID technology and digital twins. If more companies invest in automation technology, the supply chain may become a more efficient and secure system for all.
Tom Graham is the chief information officer at Smart Warehousing, a full-service, 3PL logistics partner.
Related story: Walmart's RFID Mandate: A Prequel to Wider Retail Adoption