Even though ninety percent of inventory is stationary in the supply chain, according to industry experts, inventory accuracy at distribution centers, warehouses, and plants ranges from eighty-nine percent to ninety-nine percent*. In retail stores, this number drops to below sixty percent**. That’s because most of the inventory management process is still a manual activity rather than automated via a modern digital inventory management system.
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. Whether they know it or not, they’re looking for a digital inventory management system.
That’s where robots come in to 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. Using autonomous inventory drones, for example, frees humans from performing mundane and repetitive inventory management tasks, as well as tasks that are dangerous, such as taking inventory of stock on high shelves then feeding that data into a digital inventory management system.
Supply Chain Digitization is Lagging
A 2017 McKinsey study found that the average supply chain has a digitization level of forty-three percent, the lowest of five business areas that the research firm examined. A mere two 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 merger that requires a digital inventory management system. This blended expectation is 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. 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 using inventory drone workers integrated with a digital inventory management system for help. The solution enhanced how human employees performed their jobs by completing the manual tasks of visiting each and every location via robot, freeing 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 based on data compiled by the digital inventory management system. Focused on increasing its inventory accuracy to over 99.5 percent, 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 a digital inventory management system using drone inventory workers provides 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 benefiting 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.
Sources: * Tompkins Supply Chain Consortium Report: Inventory Accuracy Through Cycle
Counting.; ** National Retail Federation, Retail Industry Leaders Association.