Managing modern manufacturing supply chains, By Alex Mills, sales & marketing director, ProSKU
Efficient manufacturing relies on managing the supply of components and sub-assemblies to support production schedules. It could be argued that the best manufacturers are the ones that not only have innovative products to meet market demands but who manage their supply chains the most effectively.
Many manufacturers need highly efficient supply chains to manage and track the flow of components, sub-assemblies, and finished products, through and out
of their business. While some businesses will manage this process from end-to-end, many more will interact with customers and suppliers on an ad-hoc
basis with varying degrees of integration with other companies’ systems. There is often very little automation of stock control processes. Customer
facing and web-enabled applications to encourage more sales or support customer services are relatively rare.
Despite this, businesses at all stages of these supply chains increasingly understand that managing stock information can be as important at the items
themselves. In the past, manufacturers and their suppliers tended to hold large amounts of stock to be sure of supplying items when needed. This is
often impractical in the modern manufacturing environment because it adds cost, increases handling and storage burdens, and risks having unwanted supplies
when customers change their requirements. The emphasis is now on leaner supply chains with lower stock levels but increased flexibility to supply items
‘Just in Time’ and in smaller batches. But reducing stock levels too far can also cause problems, because the business may not be able to meet its
delivery commitments, which can lead to loss of customers and revenues.
A happy compromise will exist somewhere in the middle and it will be different for each business. However, what is common to all is having complete oversight
of the supply chain, with visibility and control of stock central to any business involved with the supply of goods. In the modern manufacturing business,
each partner in the supply chain will need to exchange information with its immediate downstream and upstream partners. In practice, this means employing
stock control systems that are able to exchange information electronically in real time, with a variety of applications in a number of different formats.
Providing customers with accurate and timely information on stock availability and delivery times is often critical to ensuring they will place orders.
There is plenty of evidence that customers are increasingly fickle and will move on to another supplier if the items they want do not appear to be
available or will be delivered too slowly, even if that means paying slightly more.
Ensuring stock availability and visibility is therefore a mission critical priority for manufacturers and their suppliers. Yet few manufacturers appear
to offer these facilities on their websites.
While customer facing processes may be the most important there are good reasons for improving the control of stock in its physical storage environment.
Primarily this is to provide the ‘true’ stock position but there are also many other reasons related to costs. Warehouse space costs money, no matter
what size the business. Optimising stock levels helps to ensure this space is used efficiently. This could mean reducing warehouse space to control
costs, but could equally mean using existing space better to support expansion or additional product lines without extra costs – this is particularly
important if more product variations are offered. Handling items also costs money. With better physical stock control the number, frequency and even
the distance of movements can be reduced. The right systems will also support more efficient order picking and assembly by automating processes and
removing errors, all of which can improve productivity. They can also enforce stock rotation, for example managing ‘first in first out’, which can
be important for products with a limited shelf life. Similarly, by collating and tracking important product-specific information, such as batch number
or production date, they support traceability. This can be important for customer service but will also help in the event of returns or recalls. Reporting
and analytical tools will provide insights that enable better decision making and service innovations based on real evidence.
The challenge facing many manufacturers is how to implement robust applications that support their business requirements without adding complexity and
cost. Many of these businesses might only require back office functionality while others will also want to support customer facing and web enabled
processes. In practice, businesses have four broad options.
First, an enterprise warehouse management or ERP system with an extensive set of functions. These are widely used in traditional manufacturing businesses,
warehouses and distribution centres. They can be large, feature-rich and complex and are typically implemented by configuring a core application with
additional requirements specific to the customer’s operation. This can be a lengthy and costly process, which often makes them beyond the means of
all but the largest businesses.
Second, the stock control functions of e-commerce or shopping cart applications can provide some limited stock control, customer facing and web enabled
capability. While these might offer an interim solution to get the business up and running, few if any include the full set of features that provide
a long-term solution to the needs of a growing business. This is understandable because physical stock control is not the speciality of these systems’
Third, many start-ups simply manage their stock using paper-based systems or spreadsheets. These can be effective and many warehouses still use them despite
the electronic alternatives available. However, for businesses who need to share information or maintain an online presence they offer little or no
potential for providing the real time information. There are also limitations in the back office, where such simple systems can easily lead to errors
and inefficiencies that take time and money to put right.
A fourth option is to utilise the service of a distributor or fulfilment provider that operates the warehouse function on the manufacturer’s behalf. These
operations can interface with business’s other systems to present a seamless customer experience. While this approach has merit it is unlikely to be
suitable for many manufacturers, the majority of whom are likely to want to retain ownership of their stock, supply chain and associated data.
A better solution for many smaller and growing manufacturers could be a specialist cloud-based application that can integrate with other in-house and third
party systems and website front ends to support a feature-rich, warehouse-centric stock control function. This would enable greater levels of customer
service in terms of stock visibility but would not become a burden because the core service would be hosted and supported by the application provider.
At the same time, it would allow the manufacturer to retain ownership and control over their warehousing and stock control operations, as well as the
associated data. It would enable new levels of back office efficiency that, taken with the low implementation costs and monthly pricing associated
with cloud services, would simplify cost justification and shorten the return on investment.