Why real-time inventory analysis is a reality today

Posted on 27 Dec 2013 by Tim Brown

Once, inventory analysis was little more than a rear-view mirror, cataloguing past mistakes in demand forecasts and inventory planning. Today however, says Matthew Scullion of Matillion, although inventory analysis can still help manufacturers to see where their inventory is, how long it’s been there, and where stockouts are occurring, the modern-day reality of inventory analysis is much more exciting than that.

Because with inventory analysis that’s virtually real-time, powered by cloud-based Business Intelligence, manufacturers can turn inventory analysis into a forward-looking tool, not a backward-looking one. The result: less inventory, happier customers, and a factory floor not permanently playing catch-up to correct stockout blunders.

Inventory analysis: how we were

Years ago, America’s Production and Inventory Control Society carried a light hearted piece by a professor of inventory management, who moonlighted by taking on the odd consulting job.

Potential clients weren’t always convinced that they needed his services, however bloated their balance sheets. But our hero had a surefire way of persuading them otherwise. Instead of poring over print-outs and accountants’ spreadsheets when he arrived on site, he’d routinely head straight to the finished goods warehouse, senior management in tow.

And there, he’d wander around, with said management becoming increasingly uncomfortable. Why was there so much dust on this stack of products? Why did these products still have last year’s stock-taking tickets on them? These products had been manufactured months before, so why were they still here today? And why were there so many of these products—and so few of those products?

With answers few and far between, he’d then head to the raw materials and goods inwards warehouse, there to repeat the same process. Back in the boardroom, management would quickly agree his fee and beg him to start tomorrow.

Inventory analysis—from planning to problem-solving

These days, of course, things have moved on. Inventory control and re-ordering techniques have become more sophisticated, forecasting tools have become more powerful, and ERP systems have made integrated Materials Requirements Planning (MRP) and advanced production planning processes more affordable than ever.

But the resulting improvements in inventory performance have been a question of degree, rather than a total transformation. Scratch most manufacturing, and they’ll still tell you that inventory management is a problem.

The good news is that it’s a problem with a new set of tools to throw at it. For after 25 years of ever more sophisticated inventory forecasting and re-ordering tools, manufacturers are finding value in utilising inventory analysis tools instead.

Put another way, the focus is moving from trying to become ever more precise in terms of inventory planning, to accepting that planning and forecasting will always be imperfect. At which point, inventory analysis finds the problems—quickly and efficiently, and in time to put things right.

Inventory analysis: up to the minute

Better still, today’s generation of inventory analysis tools makes use of cloud-based Business Intelligence technology and cutting-edge ‘extract, load and transform’ utilities to offer inventory analysis on as near real-time a basis as it’s possible to get.

Forget a consultant wandering around months after the event. Forget inventory analysis tools that report on what went wrong last quarter, last month, or last week.

And say hello to inventory analysis that’s as up to the minute as the rest of your manufacturing operation. Inventory analysis that tells you the position this morning, or this afternoon.

Or, put another way, real-time inventory analysis that allows manufacturers to move on from chronicling inventory management decisions that went wrong, and instead use inventory analysis to spot things before they become problems.

Inventory analysis: looking ahead

What sort of things? Try these for size:

Which colours/ sizes/ styles are selling faster than forecast?
Which products are likely to stockout before replenishments arrive?
How much do today’s overdue orders equate to in revenue and margin terms?
Which suppliers do we chase first meet today’s overdue orders?
What are today’s real achieved replenishment lead times?

In other words, we’re using inventory analysis to genuinely manage the manufacturing business better, and using it to augment and inform the sorts of decisions routinely made by ERP and MRP systems, but doing so daily—or even more frequently—rather than being tied to clunky MRP runs and inadequate reporting tools.

Inventory analysis: the bottom line

Inventory analysis isn’t new, that’s for certain. But historically it’s been a backwards-looking reporting tool, not a forwards-looking means of reacting to fast-changing trends in the marketplace.

In short, for the agile manufacturer with its finger on the pulse, inventory analysis that’s virtually real-time is an undoubted game changer.

And, powered by cloud-based Business Intelligence, it’s a game-changer that’s both highly affordable and rapidly implemented.

To find out more about how your manufacturing business can profit from fast to implement Cloud Business Intelligence and Self-Service Reporting, visit Matillion’s web site at www.matillion.com.