Professional Documents
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Abdul Malek Abdul Rahmana, NurAzaliah Abu Bakar b*, Nor Zairah Ab Rahimc, Hasimi
Sallehudind
a,b,c
Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia
d
Universiti Kebangsaan Malaysia, Bangi Selangor, Malaysia
Abstract:
An efficient inventory management solution in procurement and supply chain management (SCM) plays a vital role in ensuring the nominal working
capital and increasing profitability in a large company like National Utility Company (NUC). However, in Malaysian NUC, the SCM process in utility
goods warehouse is still done manually. This caused various materials administration and storage issues such as mismatch demand between supplier and
customers, inefficient resource utilization and project delay. Therefore, this paper aims to review studies in data-driven solution, inventory management
solution and proposes a new data-driven inventory management model based on the business intelligence framework. This study starts with a literature
review analysis of supply chain and inventory management concept with current practice in the big data business solution era. This is followed by the
development of data-driven inventory management model for procurement and supply chain. As a result, this new model corroborates five major insights
for best practice including inventory visibility management, the healthy outlook in material scheduling, inventory classification and segmentation, demand
forecasting and service level planning. This paper concludes that the manual warehouse management can be digitally transformed into data-driven inventory
management by leveraging on the BI platform which able to provide more business insights to a large company similar to the utility company.
Keywords:
inventory management model, data-driven, business intelligence, utility company
store, aggregate and analyze data before transforming them into meaningful
business insight. Hence, no doubt that big data and its analytics can be a
1. Introduction
game-changer in the Supply Chain Management (SCM) transformation.
Supply Chain Management (SCM) is among the business principles
Big data are defined as a method of collecting, managing and analyzing a
that have been extensively applying a large variety of technologies, such as
large amount of data [1]. Majority of the structured and unstructured data
RFID, sensors, barcodes and IoT to integrate and coordinate every linkage
captured today is created from the past years’ compilation and collection
of the chain [2, 7]. SCM solution is widely used in managing inventory and
activities. Meanwhile, big data analytics provide the ability to capture,
warehouse to ensure this long and complex value chain are working in lean
store, and analyze a huge amount of data from multiple sources such as
and optimize manners. Nevertheless, the latest embedded technology in
corporate database, sensor-captured data like RFID, mobile-phone records
SCM enables the company to outshine in the current fast-paced and
and social media to understand the insights [2]. Big data analytics method
continuously changing the market environment. This includes by
includes the application of advanced analytics techniques to extract
leveraging on the powerhouse of big data analytics functionality to improve
valuable knowledge from vast amounts of data, facilitating data-driven
the efficiency of SCM process to enable the company to produce high-
decision-making [3, 4]. For example, Amazon leverage big data to monitor,
quality outputs and increase the value-added content of their products and
record and reserve 1.5 billion items of their inventory that are stored in
services [8]. These recent trends have urged any large company to upgrade
almost 200 fulfilment centres all around the world. Amazon also deploys
their traditional automated SCM to ‘smart SCM solution’ [4, 9]
the predictive analytics to forecast the customer purchasing period of a
Despite the recent process improvement in SCM and advanced
particular product thus ready to pre-ship it to a closer depot with
technology in big data analytics, the integration of these two domains does
anticipation of the customer to purchase it within a certain period.
not always behave as expected in giving out the desired outcomes. As
However, many industry players are struggling to cope with the effort
stated by Kache and Seuring [10], one of the common reasons is due to
to handle the velocity, variety and volume of data especially on how to
excessive demand inconsistency resulting from information distortion or
capture, record, stored, process and transform the data into valuable insights
big noise impairing judgement and business decision. Another pitfall is
to help better business decisions amidst today's competitive landscape,
failing to understand the SCM process complexity, probability and
which is full of volatility, uncertainty, complexity and ambiguity [5, 6]. A
uncertainty that might happen in on the full chain of the process [11]. A
critical success factor for the enterprise will depend on the ability to capture,
recent study by Nowicka [12] proved that ‘smart SCM solution’ has their
limitation as needs to be analyzed as a smart supply chain that works in projected scenarios with different possibilities for management decision
unison based on the digital technology ecosystem driven by customer [16, 17]. A review by Knut, et al. [18] highlight there are many supply
demand. chain analytics opportunities available as shown in Fig. 1.
Also, the cost of deploying a full package of supply chain solution
offered by various solution providers to support a smart SCM solution is
still high for most company. Estimating the return on investment is difficult
because this solution provides more business-related insights rather than
direct links to sales or cost savings. A similar situation is faced by the most
warehouse in Malaysia in materials handling and inventory management,
which has caused a hike in cost as well as high inventory level [13].
Therefore, this paper aims to investigate the current smart SCM solution,
propose a new inventory management model for procurement and supply
chain (P&SC) based on the data-driven concept. This study focuses on
Malaysian National Utility Company (NUC) as a case study as it is the
largest electricity utility warehouse in Malaysia with various type of goods
to manage all over the country. Therefore, the concept of data-driven smart
SCM is very crucial to this selected case study to be realized. Fig.1 Supply Chain Analytics Opportunity [18]
These findings are also in line with the study undertaken by Govindan, et
2. Literature Review
al. [4], which can be concluded that Supply Chain Analytics comprised of
three different strategic function levels namely:
2.1. Digital Transformation in the Energy Sector
1). Descriptive Supply Chain Analytics– explaining current business
scenarios based on historical data. This function includes basic query,
Energy and utility sector especially the NUC is undergoing a major
reporting and visualization of information.
transformation in their digital revolution. Data acquisition and exchange
2). Predictive Supply Chain Analytics– referring to the mining process of
are growing tremendously and offers valuable opportunities to the players
past data to indicate specific patterns of future situations and outcomes.
that are willing to invest in technology. The competition for customers is
3). Prescriptive Supply Chain Analytics–using the results obtained in
shifting to the online channel due to various options of platform available
Predictive Analytics process to recommend actions that capture the best
ranging from IoT power generation up to customer relationship analytics
available options of the predicted scenario.
[14]. For example, the Malaysian NUC itself has launched mobile
Based on the discussion, some of the large company already using the
applications for bill notification, presentment, and payment, as well as for
big data analytics solution to improve the performance of their supply
outage management
chains. However, the lack of capabilities and structured approach to supply
Digital distributed energy sectors either individual sites or entire
chain big data is holding many companies to proceed. For big data and
distribution systems, has just started with lots of promise. Digital
advanced analytical tools to deliver greater benefits for SCM, it needs a
transformation journey taken by the energy and utilities show promising
more systematic approach to their adoption. Next section we will review
outlook with good prospects to improve operations and increase flexibility
on related inventory and warehouse management studies to design a clear
throughout the value chain. Studies show that the digital energy
SCM process for NUC with the integration of big data analytics.
optimization can boost profitability level by 20 to 30 per cent if NUC can
grasp most of these three solutions namely smart meters and the smart grid,
2.3. Review on Recent Trends of Inventory and Warehouse
employees digital productivity and automation of back-office [15].
Management Studies
2.2. Big Data Analytics in Supply Chain Management and
Inventory Control Structure 2.3.1. Data-Driven Supply Chain Model Builder for Extended Enterprise
In a typical traditional approach of model building, the user will
Big data application empowers many corporations to reorganize data and define all steps involved in the process using existing user interface module
obtain deeper insights into their daily activities to improve operational of the simulation model. When the configuration of the model needs to be
efficiency, increase revenue while securing competitive advantages. changed it only can be performed by a simulation builder, which results in
Progressively, more firms that involve with supply chain management are a limitation of the developed simulation model to be modified by a non-
using big data analytics to make well-informed business decisions as it expert user. For a resolution, the idea of data-driven demonstration or
gives more avenues for superior business understanding, anticipate hidden simulation building is adopted [19]. In a data-driven model simulation, it
prospects and even suggest actions that best suit the company based on can be developed by a software program and using the existing company
data. Hence, a user could determine the repercussions of radical changes to
a created model, despite having little information and know-how of the company’s production and logistic channel. Hence, these studies suggest
simulation software selected. that SOP is vital for monitoring company process, as it will assist
A data-driven supply chain simulation principally can be described management to manage risks and attain the company strategic objectives.
as a bill of materials (BOM) database where the supplier information is The focus company has five sets of working SOPs including 1)
being cross-examined. Then, a simulation model is developed, run and the receive finished goods from supplier, 2) deliver finished goods to the
results will be exported and analyzed. Fig 2 shows the concept of data- customer or the third-party warehouse, 3) deliver finished goods to the
driven modelling and simulation architecture for supply chain modelling customer or outbound, 4) receive finished goods or inbound and finally 5)
proposed by Cao, et al. [20]. receive finished goods or imported as the inventory control system.
However, these SOPs used likely focuses only on the supply and delivery
of finished goods meanwhile and the standards applied are too general and
absence of specialization [22].
Along the same line, the company is required to improve their
awareness of inventory management fraud. Each company must create full
awareness and coach among the employees on fraud, along with applying
a good ethical culture to avoid any fraud incidents within the company such
as inventory theft, suspicious inventory adjustment without any supporting
documents and approval plus the conspiracy with other parties and others
[22]. At the same time, SOP on stock count can be established, so that this
practice can be executed without any form of errors and producing
consistent results.
Meanwhile, Sari, et al. [21] recommend that the customization
through warehouse management system is required along with the change
Fig. 2 Supply Chain Data-Driven Model Builder [20]
of business processes that related to system requirements. By doing this it
will eradicate the manual process thus can provide consistent information
The Supply Chain Management Model Builder generate the data
about the location of inventory stored and retrieved, create a trackable
model of the designated supply chain by choosing the subset of data,
inventory and provide real-time information related to inventory in the
importing the data, key-in and finally validate it. This means that the supply
warehouse. The suggested warehouse management will be integrated with
chain data model is originally generated by the users itself. Therefore, the
robot machine and the application will store into one single application
data-driven simulation can be a useful tool for miscellaneous supply chain
server as shown in Fig 3.
tasks but still have a similar process.
3. Methodology
There is a total of 43 warehouses (Transmission & Distribution) and storage integration within the system can be extended to include external parties
facilities all around Peninsular Malaysia at various strategic locations such as suppliers (both local and international), contractors and service
managed by P&SC for NUC. The warehousing operations are generally providers. Any changes on requirements or specification from any parties
aided by the warehouse management system (WMS). will be communicated and transpired within this ecosystem to maintain
visibility and to avoid any miscommunication while maintaining speed and
4. Results and Discussions accuracy of decision-making.
Among the proposed functions in this new data-driven inventory
4.1. The Existing NUC P&SC Inventory Management Process management model are the data mining, data models and visualizations
tools aim to support the intelligent business decision-making for NUC. The
The NUC P&SC Inventory Management process starts with the purchase inventory management system designed for P&SC and ultimately for the
request, purchase order and finally well-received to be stored in the National Utility Company need to be capable to create an efficient working
warehouse. The requirement of all materials used for the projects and environment with better control and recording of the updated information.
engineering works, such as loose equipment, tools, spare parts, logistics, There are 5 components of PDC which are 1) Inventory Visibility
uniforms and supplies are requested by each division by both online and Management, 2) Visibility in Material Scheduling, 3) Inventory
manual application. The requested need to submit the purchase request Classification and Segmentation, 4) Demand Forecasting and 5) Service
form with the details specifications of the materials and proceed with Level Planning. Fig 7 provides an overview of the proposed model.
purchase order form issued by P&SC. P&SC Procurement Policy (PPP) is
the main reference and guideline used to perform the sourcing activities. IT Proviso Link Suppliers / Contractors of Supply Cain
Finally, all those items and materials secured and purchased will be Circle
Integration
Supplier /
Layer for
transferred and stored at all warehouses and storage facilities owned by
NUC Data Flow
along the process namely 1) The Data Layer, 2) The Application Layer or
Demand Forecasting
Digital Transformation and 3) The Integration Layer for supplier and Distribution Division
contractor support. All these layers form an integral open and flexible IT
ecosystem that thrives on the application of big data analytics approach Inventory
from a constructed data warehouse. Each business unit in the NUC classification and
segmentation
including Generation Division, Transmission Division and Distribution
Division will be communicating with P&SC division continuously on the
Generation Division
provided IT platform known as Procurement Digital Center (PDC). Service level planning
The application of the model and expectation is to remove any
ambiguity and uncertainty about the status of the materials consumed,
required and available within the system. With correct data on the figure
PDC
consumed and available stock of specific materials, the appropriate analytic
model or simulation can be applied in the application layer with targeted
digital transformation with big data application. The supply chain
Fig 7 Proposed Data-Driven Inventory Management Model for P&SC
4.2.1. Inventory Visibility Management of the final working model and how efficient the proposed model towards
Inventory visibility management concept refers to better visibility of operational excellence and problem-solving capacity.
inventory across the supply chain of NUC that can help decrease the overall For P&SC of National Utility Company, the proposed model serves its
inventory significantly. Each stakeholder should be able to refer and be purpose by playing pivotal roles to integrate the system and promoting
guided with a common system that can show a real-time figure of each common platform that is proficient enough to remove any duplication and
material at any time. allows free flow of data for complete business intelligence and analytic
functions. Aggressive global market competition is forcing the company
4.2.2. Material Scheduling Visibility for the integration of intelligence technology for the supply chain
Better visibility in material scheduling refers to the excellent visibility management. The case study selected in this paper is the Procurement and
of material scheduling that permits the managers to make informed Supply Chain (P&SC) division of NUC. This division is responsible for all
decisions and better manage the interaction between risk factors involved procurement related affairs including sourcing and purchasing activities of
and material inventory. The right communications should take place all other than fuel materials used.
between all relevant parties’ seamless operation.
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Logistics and Production in Industry 4.0: Springer, 2020, pp. 51-63. Research," J. Manage. Inf. Syst., vol. 24, no. 3, pp. 45-77, 2007.
[15] B. Adrian, M. Niko, and P. Peter. (2016). The digital utility: New
opportunities and challenges.
Appendix A.