Expert Insight: On Demand Software
By Alex Thompson
Date: May 12, 2010
Chief Architect, VP Market Strategy

Supply Chain Comment:Inventory Collaboration --An
Untapped Opportunity for Fast, Proven ROI

Inventory Collaboration Solutions Are Attractive In A Normal Economy and Even More In An Economic Downturn

In the current economic environment, manufacturers are looking for initiatives that are low cost, low risk, quick to implement, and with a proven ROI. Web-based Inventory Collaboration is one of the few manufacturing execution software projects that meet these strict criteria, yet is often overlooked.

Inventory Collaboration Solutions

Inventory Collaboration solutions involve automation of a company’s replenishment processes as well as the connection of buyer and supplier communities with real-time forecast, inventory on-hand, and shipment information to reduce inventory and eliminate unnecessary expenses. While these solutions have been widely adopted in industries such as automotive and general manufacturing where  economic factors have driven automation, there are still many industries within developed economies, such as medical device and telecommunication manufacturing, as well as most industries in emerging economies, which have not taken full advantage of these solutions.

Many manufacturers now spend excessive time and resources managing orders to their suppliers. Labor-intensive processes of tracking disparate forecast and consumption spreadsheets, emails and faxes result in unreliable parts  availability. The resulting mismatch disrupts production, causes inventory levels to rise, and ultimately raises costs for buyers and suppliers. These problems are compounded when suppliers go out of business or are unable to provide the needed product.

Collaborative Inventory Management

With Collaborative Inventory Management,�manufacturers no longer need to create and email or fax unique delivery schedules or orders to their suppliers. Instead, manufacturers post on a secure website the desired and actual minimum and maximum levels for each part they buy. The supplier simply monitors this site regularly to find out its�customer's current inventory levels. Suggested delivery quantities on the site assist in finding the�appropriate quantity for the next shipments. The supplier then determines when and how much product to ship to keep inventory within acceptable limits.

Once customers have initiated a basic�Inventory Collaboration solution, they can move to more advanced stages of inventory management. Advanced solutions include dynamically managing minimum and maximum levels with automated business rules, moving to a lean environment by linking internal "pull" replenishment systems with carriers' Just-in-Time transportation routing systems, and implementing Balanced Scorecards using industry standard SCOR metrics to monitor overall business value chains, including external partners.

Key Benefits For Manufacturers and Suppliers

Unlike large-scale, unwieldy ERP implementations that can cost millions of dollars and take years to implement with unclear ROI, web-based Inventory Collaboration solutions can deliver benefits to manufacturers swiftly, and in a measurable manner. The key categories of benefits for manufacturers and their suppliers include:

  • Lower inventory levels, often up to 70% the first year with continued annual savings of more than 20%
  • Lower administrative costs combined with significantly improved data quality
  • Smoother production operations and higher plant utilization

Final Thoughts

Even in a normal economic environment, solutions such as Inventory Collaboration make sense; in an economic downturn, they are even more attractive.

Agree or disagree with Thompson's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.

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About the Author
Alex Thompson is a Supply Chain Management professional and is currently the Chief Architect, VP Market Strategy For TradeBeam.

Thompson Says:

Once customers have initiated a basic Inventory Collaboration solution, they can move to more advanced stages of inventory management.

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