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Inventory Management Gets a Reboot in the Age of Lean Manufacturing

Inventory management is one of the most critical aspects of business operations for any original equipment manufacturer (OEM). Excess inventory on hand ties up cash liquidity in unused raw materials and unsold goods, while shortages can lead to production stoppages, delivery delays and customer dissatisfaction. Inventory management anchors supply chains at OEMs, managing the raw input at one end and the distribution of finished goods to customers at the other.

The traditional linear supply chain is being rebooted in favor of a customer-centric digital supply network (DSN). What’s more, the high rate of adoption demands that enterprises digitize. In a PricewaterhouseCooper study on Industry 4.0, a third of more than 2,000 respondents said their enterprises are on the way to digitizing their supply chains. Nearly three in four said they expect to be fully digitized within five years. The same study also predicts annual efficiency gains of 4.1 percent and an annual revenue increase of 2.9 percent with the implementation of DSN principles.

What does inventory management look like in lean manufacturing, and how will the adoption of a DNS shape the smart factory of tomorrow?

Improved Transparency

Traditionally, OEMs would survey markets and calculate demand, then procure raw materials and plan production runs based on those estimates. Once manufactured, the goods would be distributed to warehouses and hopefully sold rapidly. This isn’t the most efficient method: Market forces are difficult to predict, and a manufacturing pipeline that lacks precise data is not agile.

A lean manufacturing ecosystem, on the other hand, adds data continuously and autocorrects every step of the process, reducing the silo effect between marketing, consumer relations management (CRM), production, vendors and suppliers. Each branch of the DNS can see what the other is working with and can work more efficiently.

In the case of inventory management, this means smarter processes for procurement, management of spare parts for assets, warehousing, distribution and order fulfillment.

Smarter Procurement

Plant managers in smart factories can access the scheduling of batch production processes and ensure all systems are go for each. In lean manufacturing, the shop floor worker will scan all raw goods used for a process with the help of a barcode scanner attached to a mobile device like the Samsung Galaxy Tab Active2, and such an action can automatically pull up the inventory management software.

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When a threshold for a product is reached, a trigger programmed by manufacturing personnel can determine when the raw material will be needed again and create a purchase order, which can be routed to the back office and to a plant manager’s mobile device. With a stylus-enabled device such as the Samsung Galaxy Note9, a manager can sign the order and send it to the supplier.

Smarter Order Fulfillment and Warehousing

Scanning barcodes on finished goods as they move from the production line to distribution warehouses relays real-time information about inventory, which can be especially useful during peak demand.

Since inventory management founded on lean manufacturing principles will provide complete transparency across all silos, scheduling can be ramped up or scaled down depending on warehouse stock. Such inventory management also allows OEMs to accept specialty orders for a diverse array of customers, thereby adopting even more of a customer-centric approach.

On a larger level, smart factories can implement effective track-and-trace (T&T) systems, which allow management to precisely pinpoint the location of any raw material or finished product using mobile devices. Warehouses equipped with weather sensors can also alert management about potential hiccups in the quality of stored goods or anticipated deliveries of raw material.

In the smart factory of the future, data from a variety of such sources will be streamed in real time to the ERP software, and machine learning algorithms will correct production schedules and move inventory back and forth intelligently in real time.

Mobile devices play a critical role in inventory management all along the supply chain. They can scan barcodes and RFID tags and monitor flow of raw materials and components, work in progress and finished goods, thereby keeping a tight control on inventory and ensuring an agile smart factory.

Learn more about how Samsung can support your lean manufacturing initiative every step of the way.

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Poornima Apte

Poornima Apte is a mechanical engineer turned award-winning writer. Her work has been published by the American Society of Mechanical Engineers, TechCrunch, VentureBeat, OZY, Vox Media and other publications.

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