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E-Book

Inventory management for a global supply chain
To respond to the opportunities—and challenges—of globalization, manufacturers are increasingly looking to IT solutions that provide standardization and visibility into the goods and materials that flow through their production facilities and supply chains. This eBook provides the buying tips and implementation advice manufacturers need to master inventory in the emerging global supply chain. Plus:

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Understand the benefits of inventory optimization software Learn how to choose between RFID, barcoding, and voice Read how cloud networks can provide global inventory visibility See why some companies are reconsidering vendor managed inventory (VMI)

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” says analyst Is vendor-managed inventory making a comeback? Cloud enables global inventory management Choose warehouse data management technology with care.SearchManufacturingERP.com E-Book Inventory management for a global supply chain E-Book Inventory management for a global supply chain Table of Contents Benefits of inventory optimization software can be “huge. experts say Resources from Apriso Sponsored By: Page 2 of 17 .

com E-Book Inventory management for a global supply chain Benefits of inventory optimization software can be “huge. and how widespread is it among manufacturers? Cecere: If you go with my definition -. which layers on top of DRP. safety stocks and seasonal stock. SearchManufacturingERP. and efficient supply chains are more important than ever. News and Features Editor. Calif.com spoke with Lora Cecere. and be able to address what‘s the right level of inventory -. What is inventory optimization. The second type helps you with the form and function of inventory. SearchManufacturingERP. a consulting firm based in San Mateo. To shed some light on this trend. Form is raw materials.how much and where. Inventory optimization.com Manufacturers are looking to inventory optimization software at a time when many are short on working capital. Basically.SearchManufacturingERP. That‘s being used by about 35% of manufacturers.the goal of optimization is to determine inventory -90% [of manufacturers] are doing it because DRP [distribution requirements planning] would fall within that definition. Function is cycle stocks. Software for inventory optimization comes in two types. and how can it be accomplished through the use of software applications? Lora Cecere: Inventory optimization is essentially the use of algorithms to determine a good level of inventory. semifinished goods and finished goods. One helps you with what is the right level of inventory. is deeper optimization.” says analyst By Todd Morrison. it applies optimization to look at demand variability and supply variability. an expert in supply chain management (SCM) and partner with Altimeter Group. Sponsored By: Page 3 of 17 . Who’s doing it.

etc. and are they sold as standalone products or embedded with other tools like demand planning suites. or perishable inventory. what are the benefits of using inventory optimization software? Cecere: Let‘s talk about ―done right.where is the right place for me to postpone? Postponement is where I‘m going to hold something as an intermediate. companies that have expensive inventory. What kinds of solutions are out there. Companies that are sophisticated enough to be sensitive to working capital. Sponsored By: Page 4 of 17 . If it’s done right. and then they add colors at the counter. They could postpone in some factories and not in others.SearchManufacturingERP.and add the flavors. the colors. at the last minute get flexibility.who should hold inventory and where. and it requires an organization that cares about cash flow. That‘s postponement. short lifecycles --anything that causes inventory pain. the impacts are huge -20-30% reduction in [use of] working capital. So. where they hold everything as like white paint. Although most of them are standalone solutions.com E-Book Inventory management for a global supply chain Does inventory optimization lend itself to certain types of manufacturers? Cecere: Yes. People that can do postponement -hold things as an intermediate -. 10-15% improvement in customer service. or they could not postpone at all. inventory optimization helps with postponement: What should I postpone? How should I postpone? These are long supply chains. some of them have started to become parts of suites as they‘ve been purchased by other companies. so they could postpone at many points on the supply chain. What are the various types of inventory management problems that can be addressed or solved through inventory optimization? Cecere: Postponement -.? Cecere: They come in all different flavors. My favorite example of postponement is a paint store. But if it‘s done right.‖ It requires a fairly sophisticated user. It also helps with multiple-company decisions -.

Data quality can be another. Sponsored By: Page 5 of 17 . reduction of costs. asset utilization. Most companies are focused on vertical orientation. The biggest barrier is planning expertise. What are the biggest organizational or technical challenges that manufacturers should know about before implementing inventory optimization software? Cecere: They‘ve got to have planners that know how to use it. The second barrier is the ability for the management team to focus on working capital.SearchManufacturingERP. A very vertical orientation will get you out of balance. The best supply chains have a balance between working capital and asset utilization. It takes a pretty sophisticated company to be fixated on working capital. but the more important issues are the changemanagement issues.com E-Book Inventory management for a global supply chain What features should potential users be looking for? Cecere: [Companies] should be looking at the depth of postponement and the model‘s ability to handle manufacturing versus distribution.

It does so by enabling organizations to quickly and easily adjust the execution of manufacturing operations in response to market changes and unexpected events. Apriso | 301 East Ocean Boulevard. California 90802 Toll Free: 888.com. please contact us at www.apriso. Play Video Case Study Apriso is a software company dedicated to providing its manufacturing customers a competitive advantage.7587 . adaptability and real-time control of manufacturing operations across the enterprise and supply chain network. Suite 1200. Apriso’s FlexNet platform provides visibility. For additional information. Long Beach.400.Video Case Study Luxottica Leverages 20/20 Vision for Higher Quality.

In VMI. agreed VMI has made a comeback – to a degree. she said. inventory planning. the manufacturer – not the customer – manages the customer‘s inventory. Lora Cecere.com E-Book Inventory management for a global supply chain Is vendor-managed inventory making a comeback? By Todd Morrison. ―What we‘ve Sponsored By: Page 7 of 17 . A lot of organizations that say they do VMI aren‘t engaged in ―real‖ VMI.‖ said Paul Lord. VMI is a technique for electronically connecting trading partners to facilitate planning and execution of supply chain processes and can involve one-to-one relationships or a larger network.-based research firm Gartner Inc. according to a recent Gartner report. according to Gartner. VMI fell out of favor years ago. inconsistent core functionality and a lack of maturity in organizations‘ early-stage planning also caused many to walk away from VMI implementation. In its report. Manufacturers and brand owners are looking to VMI for better control over order quantity and timing and the efficiencies it can bring. SearchManufacturingERP. an analyst with the Stamford. and performance measurement and analytics. Real VMI occurs when the manufacturer is responsible for the inventory and the orders. a partner with the San Mateo.com Is vendor-managed inventory (VMI) on its way back? It depends on whom you ask. ―The Internet revolution created a fair amount of hype over VMI.‖ Security and data-integrity issues.SearchManufacturingERP. because of unreal expectations over what it could actually do. replenishment planning. ―Expectations were unrealistic and didn‘t align with the capabilities. It has five major component s: visibility. Conn. -based consulting firm Altimeter Group. demand planning. Touted as a more efficient approach to order fulfillment and inventory management. connectivity.‖ Gartner states that retailers have turned back to VMI in part because the recession has caused them to cut back on the staff to do the work. Calif. News and Features Editor. titled ―The Resurgence of Vendor-Managed Inventory: A Landscape.‖ Cecere said. ―The answer is yes and no. according to analysts.

―‘Give me recommendations on inventory and replenishment. They‘re stuck in the 1970s. but what they‘re really getting is free planning. Please plan for me. Sponsored By: Page 8 of 17 .‖ Cecere said.‘ says the retailer. What are my VMI options? Traditional VMI systems were built around extending core supply chain planning functions and installed on the premises. David Mackail. ―Once you get outside of top 20 [customers]. Wal-Mart isn‘t the only one. according to Gartner. but I‘ll make the final decisions. ―In Europe. This meant creating a new database to support customer account data or passing data back to the supply chain planning application. ―Things change so much. companies like Wal-Mart Stores Inc. there are many more Web-enabled applications that give customers a wider variety of options. That includes seasonal products like cold medicines and suntan products.com E-Book Inventory management for a global supply chain really had is more of what I‘m going to call ‗lip service‘ to VMI. where demand is high but unpredictable. Cecere recommends buying Software as a Service as opposed to on-premise versions.‖ Manufacturers that make products with short cycle times and high volumes are also using VMI.‖ For example. said though it‘s uncommon for apparel companies to use VMI. ―You‘re a bigger company. and I would be looking at a provider that has flexibility. often use VMI to ―offload‖ the labor associated with planning.‖ she said. Today. it‘s necessary in his market. Cecere said. and instead rely on the manufacturer in an effort to reduce costs and shift planning onto someone else. according to Cecere.SearchManufacturingERP. Others had a different take. we have a lot of smaller customers.‖ Mackail said. however. who oversees the European VMI operations for a global footwear company based in the Pacific Northwest. the supply chain capabilities are not very good. Smaller grocery chains have gone to manufacturers like Procter & Gamble and said.

‖ What’s next for VMI? Cecere said manufacturers and customers who are interested in VMI implementation should first ask themselves who ―owns‖ the inventory and who owns the order.SearchManufacturingERP. establish the system. This initial period should take about six months. she said.com E-Book Inventory management for a global supply chain Those kinds of customers want VMI because they don‘t have the capability to flow the product to the stores themselves. shelf position is improving. ―The replenishment algorithms are very simple.‖ he said. Cecere said. Once they begin executing their plan. ―You have to be able to have the right tools and the right KPIs [key performance indicators] and the right analytics. on-premise VMI application that links up to sales and operations systems. and the two sides are working more efficiently and more closely than before. but what‘s r eally important is the analytical tools that come with the software.‖ Mackail‘s company uses a stand-alone. Sponsored By: Page 9 of 17 . It‘s enough time to clean the data. and determine if inventory is indeed being lowered. they need to have an idea of what success looks like.

com E-Book Inventory management for a global supply chain Cloud enables global inventory management By David Essex.SearchManufacturingERP. ―With the globalization of logistics and longer. according to Armstrong. But before they can manage that inventory. Most global 3PLs have their own proprietary systems for providing customers with inventory visibility. And as more companies position their production and distribution overseas to be closer to emerging markets.‖ Some of these lead logistics providers function as so-called 4PLs -. Sponsored By: Page 10 of 17 . Several supply chain management applications are involved in tracking and managing the inventory. often piecing them together from third-party transportation management system (TMS) and warehouse management system (WMS) software. transparent supply chains only intensifies. the need for tight. They want visibility -. Site and News Editor. according to Armstrong. ―A lot of them manage the local providers and work with them as a lead logistics provider. ―It‘s important to really align yourself with providers that have significant capabilities on a global basis. most often comes from outsourcing the entire problem to a third-party logistics provider (3PL) that specializes in global shipping. a Milwaukee-based analyst firm that specializes in logistics.com Inventory management becomes a global problem when manufacturers get their raw materials or subassemblies from overseas. inventory management becomes more critical. more complex supply chains.. president of Armstrong & Associates Inc. they need know where it is. SearchManufacturingERP.‖ said Evan Armstrong.essentially supply chain integrators that bring together 3PLs and customers while providing support services like contract management and inventory visibility. The answer.an overused buzzword in domestic supply chains that suddenly sounds fresh and meaningful. especially when the inventory is as likely to be moving on a freighter in the Pacific or sitting in Long Beach customs as it is to be in the warehouse down the street.‖ he said.

transportation and order management. cloud computing technologies Sponsored By: Page 11 of 17 . usually. a consulting firm based in Cambridge. associate vice president for the supply chain practice at Patni Americas.SearchManufacturingERP. such as demand planning and kitting of related products.com E-Book Inventory management for a global supply chain ―Every major 3PL has some kind of integrated system suite like that. ―You can get down to the item level with these systems. What if you have your own WMS and TMS? ―You might just tell your provider to use your system.‖ Barbera said.‖ A few 3PLs can even take over functions normally performed by manufacturers. Moving toward collaborative global inventory management Analysts and vendors say these global logistics networks make it easier for manufacturers.. ―If you don‘t have that visibility. ―You have to figure out how to relinquish the control. multinational manufacturers rely heavily on electronic data interchange (EDI) for their inventory-related transactions. as well as compliance with international regulations.‖ A smaller number of providers specialize in just the computer networks and don‘t own a single truck or warehouse. senior solutions architect at Patni Americas Inc. ―But 3PLs can save more money with their system. Their goal is to be a single source of applications and data for all the major steps in global logistics.‖ he said. Traceability of subassemblies and raw materials is another important driver of global visibility into inventory.‖ said Joseph Kemp. including inventory. then you can‘t do any contingency planning or workarounds if that component is in the critical path. Mass. For smaller companies.‖ Armstrong said. But companies must first overcome trust and integration issues to use the networks. adding that many owners of top-tier ERP systems have the misconception that it‘s too expensive to push out inventory data to their global suppliers. suppliers and 3PLs to work together to optimize the supply chain and reduce inventory costs. said Saverio Barbera. Large.

Other manufacturers use a SaaS global trade management (GTM) application to manage security clearances and compliance with import and export regulations (see the sidebar). Manufacturers often turn to freight forwarders who specialize in moving goods across borders and.‖ Armstrong said. That makes it hard for them to get access to supplier network collaboration (SNC). Patni is working to convince the vendors to offer cloud-based ―SCN lite‖ for easier access -. including inventory data. uses just such a cloud-based system to give its suppliers access through Web browsers. a type of network offered by major ERP vendors that lets suppliers and manufacturers share information. How should manufacturing IT departments respond to the need for global inventory management? ―It‘s important to be part of the team that helps do the selection for logistics providers. ―If you have truly offshored your manufacturing. it stands to profit if the idea takes hold. which gives them more leverage and makes IT‘s job easier. demand planning and other common methods for lowering inventory costs don‘t work as well when goods sit in port awaiting customs clearance. the home-appliance maker Whirlpool Corp. Reaping the benefits of global trade Inventory optimization. like 3PLs.SearchManufacturingERP. Barbera said his previous employer..‖ Ba rbera said.‖ Armstrong said. maintain their own information systems to give customers real-time views into their inventory.com E-Book Inventory management for a global supply chain like Software as a Service (SaaS) could help make global inventory visibility more affordable. ―The mom and pops don‘t have EDI infrastructure. it‘s very hard to handle the regulatory compliance.and as an ERP integrator for those same companies. Armstrong also advised hopping on the bandwagon with manufacturers that are consolidating their businesses on three or four 3PLs. Sponsored By: Page 12 of 17 .

SearchManufacturingERP.‖ he said. ―The fewer the number of providers.com E-Book Inventory management for a global supply chain ―Most manufacturers are going to have a lead logistics provider.‖ Sponsored By: Page 13 of 17 . the fewer data sets you have to handle and the fewer the integrations.

For example. according to Klappich. or radio-frequency identification.com E-Book Inventory management for a global supply chain Choose warehouse data management technology with care. ―If barcode‘s cheaper and easier. Barcoding.‖ Sponsored By: Page 14 of 17 . Most of today‘s warehouse management system (WMS) software has the ability to m anage data captured with either technology. but experts say there are a number of things to consider when deciding which technology to use. as in the case of two-dimensional (2D) barcodes. ―If you look at the advent of RFID -. then barcode‘s the right thing.‖ Klappich said. Dwight Klappich. RFID tags usually hold more information and can be read at much longer distances than barcodes without requiring ―line of sight‖ between the tag and scanner.the advent of people talking about using that for warehouse management -. and then processed in a database. and it‘s cheap. News and Features Editor. Barcode works.‖ Klap pich said.-based research firm. Why RFID is not always the answer RFID.com RFID tags and barcodes are still the most common and effective warehouse management systems for gaining real-time insight into a company‘s inventory control. ―It‘s lost luster. in which information is transmitted wirelessly from a tag to a scanner. Gartner Inc. because people realize it‘s often just as easy to scan a barcode as it is to have the RFID. is a generally more stable. more rapidly evolving technology. an analyst with the Stamford. which can encode more information in a smaller space.SearchManufacturingERP. predictable means of capturing data that has been in use for nearly three decades.it was really to save one more second in how fast you would be able to scan a box. SearchManufacturingERP. is the newer. Conn. on the other hand. according to C. The barcodes themselves continue to evolve. experts say By Todd Morrison. RFID is not the end-all that some thought it would be in the technology‘s early years. it means not choosing RFID automatically when barcodes will suffice.

an association of automatic identification and mobility vendors. On paper.‖ Moore said. Pa. computer servers and aerospace parts. are growing in popularity. pallet put-away and stock checking. other alternatives. It‘s important to be realistic about RFID.but that may only be in pristine environments.). such as voice technology. Klappich said. the implementation is not. which also cannot be read around corners. where the cost of a tag is inconsequential compared with the cost of the item. Moore said. One of the other primary concerns with RFID is that it is more difficult to use than barcode scanning. according to Bert Moore. he said. undergo rigorous testing. RFID also makes sense with items such as flooring rolls. Voice technology allows workers to pick orders verbally by using a wireless. Users also need to make sure the overall RFID configuration. as well as the tags themselves. RFID ―will give you useless information at the speed of light.com E-Book Inventory management for a global supply chain Choosing RFID over barcodes makes more sense with expensive products like plasma TVs. If not configured properly. it may look as if a tag can be read from 20 feet away -. director of communications and media relations for AIM (Warrendale. It‘s just another tool. Sponsored By: Page 15 of 17 . The more realistic scenario might be closer to seven feet. Moore said.SearchManufacturingERP. ―It‘s not the greatest thing since sliced bread.‖ Voice-directed warehouse management While barcode scanning and RFID tags are tried-and-true warehouse management staples. The technology can also be used for goods receiving. Electrical devices like welding equipment and conveyor motors can cause ―serious interference‖ with RFID readings. Klappich said. all of which communicate with the WMS.‖ For one. Companies should never design an RFID system based on the spec sheet. wearable computer with a headset and microphone. users must survey their site for interference. which are large and bulky and would need multiple barcodes. ―Even if the technology were plug-and-play. he said. and products that contain liquids or metal can interfere with the frequencies of the tags.

Voice is growing.SearchManufacturingERP. ―Voice used to be relegated to places where you couldn‘t use your hands.‖ Klappich explained.com E-Book Inventory management for a global supply chain according to the website voicepicking.‖ Sponsored By: Page 16 of 17 . People are operating their entire pit processes with voice. much more than in the past. stuff with big mittens and coats.com. ―The technology‘s gotten inexpensive and ubiquitious enough that we‘re seeing people use voice. One benefit of voice technology is that companies no longer have to print and attach labels. like a guy pic king ice cream in a freezer.

L'Oréal. MBDA. Bombardier. control over and synchronization across global manufacturing operations and the product supply network.apriso. It does so by enabling manufacturers to achieve and sustain manufacturing excellence while adapting quickly and easily to market changes. Honeywell.com. Apriso serves 200+ customers in 40+ countries across the Americas. Volvo CE. Learn more at: www. Trixell. Europe and Asia. Saint-Gobain and Essilor. Lockheed Martin. Customers include GM. Apriso supports global continuous improvement by delivering visibility into.SearchManufacturingERP.com E-Book Inventory management for a global supply chain Resources from Apriso ARC's Operations Management: The L'Oreal Way British American Tobacco Smokes its Competition (a Success Story) Valeo Drives Global Best Practices (a Success Story) About Apriso Apriso is a software company dedicated to transforming global manufacturing operations. Sponsored By: Page 17 of 17 . agility and quality while reducing costs and idle inventory. Textron Systems. Apriso's FlexNet is a BPM platform-based software solution that helps manufacturers to increase efficiency.