Free up your working capital by increasing global inventory visibility

I do not have to sell the idea of reducting your working capital as there is not even a single organization that does not want to freeup its working capital so that it can be invested in expanding, modernizing or improving its operations in many ways. I want to share one of the effective ways of not only reducing the working capital but also to improve some other critical business metrics. 

In case, an organization has multiple warehouses (and in multiple continents) due to reasons like faster delivery to customer, savings in shipping costs or low cost local sourcing of components/products then it makes good sense to improve on its capabilities in having visibility of inventory while booking a sales order from a customer. It means, that if an organization has the ability to see in real time, which all of its warehouses has the item available required by the customer then it makes easier to make decision on which warehouse should be used to ship the material so that following metrics can be improved:

• Reduction in  slow moving inventory - If a warehouse holds large stock of slow moving items and a "closer to customer" warehouse also have that item but in bare minimum quanttities, even then, one might want to select the warehouse which is far but provides the opportunity to reduce that slow moving item in bigger numbers
• Reduction in item obsolescence - Some items have shelf life and having visibility on their stock in different warehouses provides us the opportunity to ship the soon expiring items first
• Higher ontime delivery - Again, if a nearer (and default) warehouse for a customer, does not have the item and will have to procure it to ship to the customer, then visibility of stock in other warehouses provides the opportunity to check out if the item is available elsewhere and can be shipped to the customer cost effectively without compromising on on time delivery
• Higher Customer Satisfaction - This business metric will get a boost from the above metric (high ontime delivery) and we are sure to see much improved confidence in our organization when their orders are reaching on time more frequently
• Higher Inventory Turns - The most obvious and effective benefit of global inventory visibility is its capability to improve the overall inventory turns by provding us the opportunity to optimize stock at all warehouses and hence improving annual inventory turns which results in freeing up of working capital

So, keep an eye on a solution in your Supply Chain that provides you the capability to improve your real time visibility to global warehouses so that you can reap the benefits that it brings.

Expand your supply chain visibility horizon

Supply chains globally are becoming more and more complex and one of the areas that are worst affected by this are the lead times and in transit inventory. This increases the overall supply chain management costs by not only increasing the time period of inventory stay in your premises but also by increasing the inventory obsolescence. So, reducing costs by driving down excessive inventory on hand should be the most important focus area for the best in class organizations and how can we do this? We can do this only if we know exactly, where the problem is or where are the opportunities of improvement that can substantially bring us tangible benefits.

This brings us to the business case for the need of increasing supply chain visibility (there are other factors too but we will just stick to this one in this article). Keeping an eye on the item movements within our organization is the primary metrics of supply chain visibility and be it incoming demand from customers or other channel partners or our own manufacturing or supplier receipts or shipping for that matter, all are mandatory parts of the supply chain visibility. All organizations, in form or another strive to keep things visible so that more informed decisions can be taken in the areas of manufacturing and supplier receipts specially but it is high time that we move to expand the horizon of supply chain visibility (SCV) and include our suppliers into it. Infact, best in class organizations have already started including suppliers into their SCV plans and they track metrics like:

• Receipts of raw material at their supplier’s end
• The shop by shop supplier manufacturing process and major production events
• Events of trucking from supplier end to their premises
• Custom clearance events

Including metrics like above will reduce your vulnerability of failing to fulfill demand on time and also will enable you to plan your own inventory in a much better way so that it stays the shortest time in your premises.

Coming back to internal factors or metrics that need to be included in the comprehensive SCV plan, we need to make sure that while we keep on measuring the manufacturing lead times, supplier lead times, customer-distribution centers proximity and relationships etc. but we also need to expand the metrics to include:

• Capacity constraints
• Shipping schedules
• Forecasted and actual landed cost of shipments
• Inventory rebalance among distribution centers or warehouses
• Shipment delays both before and after shipment and even in multi leg shipments
• Re-routing frequency of shipping specially for multi leg shipments
• Item level genealogy and traceability
• Availability of true and useful information for taking decisions

Expanded supply chain horizon will not only help you in tracking the metrics that might not be seen as directly impacting your operations (but still are) but will also help you in identifying the leakage areas that reduce the overall efficiency of the supply chain.