The top 3 consequences of a poorly conducted inventory

September 30, 2020

The coronavirus crisis has further accentuated the need for control over its resources. A motorcycle cannot be delivered without bases, a piece of glass without trestles. 

The coronavirus crisis has further accentuated the need for control over its resources. A motorcycle cannot be delivered without bases, a piece of glass without trestles. 

In an economy where real-time international exchanges are increasingly numerous, and where the search for productivity is becoming a crucial issue, the logistics sector continues its digital transformation. The search for agility and responsiveness to handle even more flows has become essential in an ecosystem that is both connected and collaborative. 

According to Jean-Marc Soulier, Director of the Supply Chain practice at Wavestone, "to increase the speed and agility of companies, to better control its network of suppliers (ranks 1, 2 and 3), to know in real time the state of its stocks and capacities, and to be able to plan and replan at high speed".

One of the main issues to be resolved is to be confident of having sufficient assets available on loading sites to be able to meet future orders while maintaining a reasonable safety margin on the size of the fleet. 

Lack of assets at the loading sites can be caused by the following cases:

  1. Fleet size is not adjusted

Supply chain players regularly invest in equipment on a localized basis, by agency or by country, as well as in different types of equipment depending on the needs of the operation. In cases where the activity involves just-in-time flows, such as in the automotive industry, for example, responsiveness to an order is essential. This relocation of resource management and the urgency of customer needs are driving manufacturers to increase the size of their fleets, for safety reasons and to meet seasonal requirements.

Today's real-time inventories are generally based on declarative data from operatives field who manually populate the TMS and WMS of internal systems. Often each country or BU has a different software. An annual physical inventory can also be organized on a company-wide basis.

As explained by Lucie Vauché, innovation project manager at FM Logistic :

"Operationally, [...] these are fairly cumbersome processes. And when we have to carry out a tax inventory, i.e. the annual inventory, verified by the clients' auditors, we are under pressure. We have to inventory the entire warehouse in a limited time, often at the weekend. That's all the more resources to plan for that period."

One of the solutions to avoid these asset shortages is to have real-time visibility on the number of assets at each loading site by asset type.

  1. The use of assets is diverted

Warehouses need to store a certain volume of goods in order to be transported to their final destination. However, many companies do not have enough storage space and therefore divert the use of certain materials in storage, both inside and outside the factory. 

This use of the asset base is likely to lead to a lack of availability as it diverts assets from their original purpose. This can also be the case on the delivery site of the customer, who has not finished unloading his stock takes advantage of this available material to keep his goods. 

Thus, when the investment budget made at the beginning of the year did not take into account these diversionary effects, a lack of asset may have an impact on the entire network. 

  1. There is an imbalance in the distribution of materials between agencies.

While the availability of assets determines the proper functioning of the supply chain, inventory imbalances appear quite quickly on flows that are mostly long distance or international. 

To optimize the size of the park, companies often use a logic of mutualization of resources in the network. Without granular and real time control of the distribution of this equipment or min/max rules on the number of assets to be used at a given time (a number that can change according to the transport plan and variations in customer orders), differences can widen between different countries or agencies. 

Let's take Saint-Gobain Glass as an example: Each of the 18 factories must have at all times a minimum of each type of easel ready to be used: indeed, no easel, no delivery!

In conclusion, going digital to finely control the availability of assets and to be more proactive in the use of your equipment facilitates inter-agency pooling and guarantees the customer's promise of deliveries.