Technology Driving Inventory Management to Next Level

Inventory management is the lifeblood of any supply chain, determining how much product a company buys, stores and sells. 

As a supply chain function, it is responsible for operational facets such as controlling and overseeing purchases from suppliers and customers, maintaining the storage of stock, controlling the amount of product put out for sale, and also order-fulfilment. 

Before the pandemic, the just-in-time (JIT) inventory system was dominant, and the undisputed champion of JIT was Apple, who at its pre-pandemic peak, was able to turn over its inventory once every five days. Its ability to launch, manufacture, and ship millions of iPhones globally like clockwork – with virtually no inventory surplus – was held to be a miracle of JIT.

But the JIT model is susceptible both to supply and demand shocks, and there have been a seemingly endless succession of these in recent years. As well as the pandemic and the Suez blockage we’ve had Russia’s invasion of Ukraine, and now the attacks on commercial shipping in the Red Sea.

This conveyor belt of disruption has seen technology become pivotal to modern inventory management, and at the heart of much of this is IoT technology.

IoT devices can be integrated into every stage of the supply chain, from production to delivery, allowing businesses to track their goods in real time. 

This increased visibility enables businesses to make informed decisions about inventory management, transportation, and production schedules, which can lead to significant cost savings and improved customer satisfaction.

A prerequisite for IoT is RFID (Radio Frequency Identification), a technology that has its roots in the radar technology that emerged during World War Two.

RFID, allied to Industry 4.0 technology, helps organisations track inventory and deliver the flexibility, convenience and choice consumers increasingly expect in an omnichannel world.

Avery Dennison's Jenni Krohn says RFID-based digital twin technology is revolutionising supply chains. A digital twin holds all the information about a physical item and spans the lifecycle of the product, from manufacturing to point of delivery.

Krohn is Market Development Manager, Ecosystems Healthcare for Avery Dennison, a multinational manufacturer and distributor of labels, tags, RFID tech, and specialty medical products. 

Speaking about the role of RFID in pharma supply chains, Krohn says: “RFID is the most cost-effective technology capable of broadening the scope of IoT. It is an easy and secure way for patients and caregivers to engage with medicines and diagnostic devices.

She continues: “Digital twins create a unique digital identifier for every single item in the supply chain and offer end-to-end visibility, reduce supply chain disruptions and help manage inventory.”

In hospitals  and pharmacies, she points out, the technology facilitates automated medication and inventory management and reduces the risk of medication errors.

Someone who expects to see even more widespread adoption of technology for the management of inventory is Don Hnatyshin, who is Chief Supply Chain Officer at Molex, a US-based manufacturer of electronic, electrical, and fibre optic connectivity systems. 

The company offers an estimated 100,000 products across a variety of industries, including data communications, medical, industrial, automotive and consumer electronics. 

Hnatyshin predicts that 2024 will see digital tools and AI “accelerate the delivery of data-driven intelligence to better manage global supply chains and increase on-time customer deliveries”.

“These advanced data-driven tools will deliver real-time visibility and actionable business insights to help companies respond with greater speed in bolstering supply chain resiliency,” Hnatyshin says. 

He adds that tech-driven improvements to the supply chain will help businesses navigate “continued fluctuations in market demand, which will be an overarching issue in 2024”.

And he feels that trade and tariff issues will be “a constant concern for global supply chains”, and says that issues such as this make it increasingly important that organisations select the right suppliers in the most favourable regions closest to end customers.

He says: “As global markets rebalance inventory levels, optionality will become a core strategy to mitigate issues such as foreign currency exchange rates and geopolitical volatility. 

“This will be particularly important in the electronics industry in 2024, with an even stronger bias in Mexico and Southeast Asia.”

Hnatyshin observes that, while high pandemic-driven demand caused an ‘inventory hangover’ in 2023, this “should dissipate by the second half of 2024, as inventory levels continue to rebalance”. He predicts this will occur “first at the component level, then work through raw materials”.

Hnatyshin sees tech making a positive impact on inventory management.

“In 2024 ongoing investments in enriching data ecosystems will elevate overall demand and supply planning initiatives,” he says. “Excess inventory is a great example, as AI and ML can optimise inventory health and velocity, while generating a much clearer picture of potential outcomes to improve decision making.”

******

Make sure you check out the latest edition of Supply Chain Digital and also sign up to our global conference series - Procurement & Supply Chain 2024
******
Supply Chain Digital is a BizClik brand