Even though 90% of inventory is stationary in the supply chain, inventory accuracy at distribution centers, warehouses, and plants ranges from 89% to 99%*. In retail stores, this number drops to below 60%**. That’s because most of the inventory management process is still a manual activity.
Knowing what inventory is on hand at any given time in the supply chain—and then tying that data to transportation and delivery—is a never-ending challenge for most companies. Overcoming the hurdle requires a reassessment of existing inventory planning processes and an approach that builds out a clearer view of inbound inventory.
As companies continue to wrestle with this challenge, more of them are looking at technology enablement as a way to get to the “next level,” and to help them perform in a more predictable and confident manner. The same companies also want to leverage their existing workforces and give them the tools they need to become even more productive.
That’s where robots come in and augment the human factor (versus replacing it). Using digital inventory that’s powered by drones, robots, and other automation tools, companies can improve in-stock positions, minimize total inventory levels, and increase sales-per-square-foot in their warehouses and DCs. Autonomous drones, for example, can perform mundane and repetitive inventory management tasks, as well as tasks that are dangerous for humans, such as flying up to view inventory on high shelves.
Supply Chain Digitization is Lagging
A 2017 McKinsey study found that the average supply chain has a digitization level of 43 percent, the lowest of five business areas that the research firm examined. A mere 2 percent of the surveyed executives said the supply chain is the focus of their digital strategies. The same McKinsey research suggests that, on average, companies that aggressively digitize their supply chains can expect to boost annual growth of earnings before interest and taxes by 3.2 percent—the largest increase from digitizing any business area—and annual revenue growth by 2.3 percent.
The problem is that companies can no longer just ignore the fact that velocity and accuracy go hand-in-hand—a harsh reality in today’s digital supply chain, where e-tailers like Amazon continue to push the envelope on accuracy and fast delivery. Consumers are used to ordering a $169 robotic floor vacuum one day and having it delivered to their doorsteps at no extra charge (outside of the annual Prime subscription fee) the next day. The same consumer brings those expectations into the business world, effectively pushing the need for faster, more accurate orders across both the business-to-business (B2B) and business-to-consumer (B2C) channels.
In search of a more efficient way to manage its more than $250 million in inventory within one of its DCs, a retailer recently turned to drones for help. The solution enhances how those workers perform their jobs by completing the manual tasks of visiting each and every location to free them up to perform value-added tasks (e.g., such as reviewing variance reports and ensuring that the inventory is reported as accurately as possible). Fewer people on the warehouse floor also means less congestion and fewer accidents for the employees.
Currently, the retailer is piloting the drone’s solution with expectations of enhancing its operations across a number of key performance metrics. Focused on increasing its inventory accuracy to over 99.5%, the retailer also wants to improve its order fill rates and customer satisfaction levels. In addition, overall picking times will decrease without the time-consuming variance process (i.e., when order-pickers discover inaccurate item quantities).
Wanted: Accurate Inventory Reconciliation
Every organization on the planet that has a significant supply chain operation is plagued by inventory reconciliation problems. E-commerce, omni-channel, constantly-changing customer demands, and a labor shortage aren’t making those problems any easier. In fact, the rise of the digital supply chain is directly impacting how retailers, manufacturers, distributors, and logistics providers manage inventory across all of their sales channels.
In every warehouse or retail store there is an opportunity to add value, and the good news is that robotics and drones provide payback within three to six months (versus five to 10 years for more traditional equipment and/or software). There’s a lot of value that can be eked out of just overlaying a piece of advanced technology in an existing facility, and a lot of smart companies are already benefitting from that. After all, anytime you can add more value the end result is going to be positive, regardless of what environment you’re operating in or what market challenges you’re dealing with.
* Tompkins Supply Chain Consortium Report: Inventory Accuracy Through Cycle Counting.
** National Retail Federation, Retail Industry Leaders Association.
Matt Yearling is CEO of PINC Solutions. He joined PINC as chief executive officer in March 2013 and is responsible for the overall strategic and operational management of the company. Matt’s past roles include vice president and general manager of Encryption Products at Symantec Corporation, senior vice president of Global CRM Product Development at Sage Inc., Chief Technology Officer for Embarcadero Systems Corp (a Ports America company). As vice president of Oracle On Demand, Matt played a pivotal role in making it Oracle’s fastest growing line-of-business.