Defining the Future of Integrated Supply Chains and Inventory Management

Factory Floor Automation and Inventory Control

Enabling greater integration between the factory floor, suppliers, quality management, production planning, accounting and the executive management teams leads to greater accuracy, clarity and consistency of reporting, and high performance over time. Being able to quickly assimilate, aggregate and analyze shop floor inventory data then translate it into financial metrics is key to any company's long-term growth. Add in the time pressures of semiconductor and computer equipment industries and the urgency to create a unified view of shop floor inventory positions exponentially increases (Alexander, 2001). These and other findings are provided in the article Factory floors go online -- pioneering manufacturers close the final gap in their supply chains (Alexander, 2001). One of the most interesting key take-aways from this article is that only 11% of all manufacturers are actively trying to integrate the many shop floor and inventory management systems to the large-scale Enterprise Resourcing Planning (ERP), pricing, Manufacturing Execution Systems (MES) that have in many instances been installed for decades. The many benefits of having inventory control online in real-time from the factory floor to the top floor of a manufacturer including all departments that also rely in inventory data can be seen in the results Lexmark achieves (Alexander, 2001) in addition to Toyota and their highly customized and very effective Toyota Production System (TPS) (Steele, 2001).

The intent of this analysis is to evaluate the many benefits of having inventory control on the shop floor, running in real-time, providing aggregated feedback on manufacturing performance. MES systems integrated with ERP and financial reporting systems are also capable of interpolating inventory data and creating a highly effective dashboard for senior management to also use in managing manufacturing. The integral role of inventory data across the entire supply chain is essential for reducing lead time and performance while accelerating time-to-market (Drickhamer, 2001).

Assessing the Benefits of Having Inventory Control on the Shop Floor

One of the most interesting aspects of manufacturing operations is that the larger they become, the more the assumption base of just what customers expect and how they expect it -- basically their expectations based on experiences -- gets amplified throughout a manufacturers' value chain. This is especially evident in how Toyota had constructed the Toyota Production System (TPS) to reflect customers' perception of time-to-market and especially quality, which is reflected in the many uses of Six Sigma in the TPS process (Dyer, Nobeoka, 2000). Integral to the success of the TPS approach to onboarding suppliers, defining supply chain collaboration workflows and creating inventory management and alerts-based messaging is the idea of having inventory minimized and a catalyst for customer fulfillment, not a roadblock for it (Dyer, Nobeoka, 2000). Dyer & Nobeoka found that inventory and production ata shared across an enterprise can become more valuable that dollars saved from pushing suppliers for lower prices (2000). What the researchers found was the experience effect of inventory data, where the greater its accuracy, clarity and velcoi8ty shared throughout an organization, the greater its value becomes -- eventually become so significant it could be quantified in dollar terms (Dyer, Nobeoka, 2000). These findings from Toyota further support the accumulative effects of having Lexmark engineers capable of tracking the specific performance of quality levels for inkjet replacement cartridge production (Alexander, 2001).

Managing inventory levels is a multidimensional challenge for any manufacturer however. Creating inventory control processes across the factory floor often begins with the streamlining of existing, often outmoded manual processes first (Steele, 2001). Once a specific series of processes have been successfully modeled and tested through a pilot to ensure their accuracy and traceability, IT systems are then used for streaming the process and making it globally scalable. Measurements of this type of piloting often revolve around the improvements made in Available-To-Promise (ATP), Capable-To-Promise (CTP) (Drickhamer, 2001) and support for advanced manufacturing strategies including assemble and build-to-order (Alexander, 2001) make inventory visibility from the factory floor even more vital the successful management of a manufacturing company.

The most important revenue producing strategies any manufacturer has is also often the most non-standard and difficult to manage as well. New product introductions are a case in point. Launching a new product can often generate up to 70% or more of a company's revenue and therefore the orchestration across all departments is essential for their success. That's why it is critical for inventory visibility to be available across all departments in any manufacturer; each has to be able to anticipate and build their plans around product availability as a result. The many enterprise-class systems including ERP, Supply Chain Management (SCM), Manufacturing Execution Systems (MES), pricing and services all must be tightly orchestrated for a product introduction to be successful. Unfortunately however these systems all use varying approaches to defining inventory levels, and also provide varying degrees of inventory velco8ity measurements (Gould, 2002). In the most efficient and well-run organizations however there is a tight integration to the process level of inventory positions and a mastery of Just In Time (JIT) inventory positions and advanced systems for tracking overall inventory and quality management performance (Dyer, Nobeoka, 2000).Often in new product introductions, the quality and predictability of processes often becomes secondary to just getting the new product built and out. This is especially the case in automotive supply chains where inventory management is more complex and requires a greater degree of advanced planning and optimization relative to other industries (Gould, 2002). Inventory visibility across all departments and translated into financial metrics to senior management is essential for the successful orchestration and launch of new products and their supporting services. The highest-performing companies are capable of taking the most important analytics and metrics of performance for inventory management, and can successfully integrate and assimilate the data into real-time production strategies as well (Alexander, 2001).