Managing modern manufacturing supply chains

By Alex Mills, Sales & Marketing Director, ProSKU.

Efficient manufacturing relies on managing the supply of components and sub-assemblies to support production schedules. It could be argued that the best manufacturers are the ones that not only have innovative products to meet market demands but who manage their supply chains the most effectively. Smaller and growing manufacturers and their suppliers have hitherto had relatively few options compared with their larger counterparts but the emergence of cloud-based stock control services presents new possibilities.

Many manufacturers now employ processes that allow them to make products with a wider range of options to customer order. To offer this flexibility they need highly efficient supply chains to manage and track the flow of components, sub-assemblies and finished products in, through and out of their business.

While some businesses will manage this process from end-to-end, many more will interact with customers and suppliers on an ad-hoc basis with varying degrees of integration with other companies' systems. There is often very little automation of stock control processes. Customer-facing and web-enabled applications to encourage more sales or support customer services are relatively rare.

Despite this, businesses at all stages of these supply chains increasingly understand that managing stock information can be as important at the items themselves. In the past, manufacturers and their suppliers tended to hold large amounts of stock to be sure of supplying items when needed. This is often impractical in the modern manufacturing environment because it adds cost, increases handling and storage burdens, and risks having unwanted supplies when customers change their requirements.

The emphasis is now on leaner supply chains with lower stock levels but increased flexibility to supply items just-in-time and in smaller batches. But reducing stock levels too far can also cause problems because the business may not be able to meet its delivery commitments which can lead to loss of customers and revenues.

A happy compromise will exist somewhere in the middle and it will be different for each business. However, what is common to all is that having complete oversight of the supply chain with visibility and control of stock should be central to any business involved with the supply of goods. In the modern manufacturing business, each partner in the supply chain will need to exchange information with its immediate downstream and upstream partners. In practice, this means employing stock control systems that are able to exchange information electronically in real-time with a variety of applications in a number of different formats.

Providing customers with accurate and timely information on stock availability and delivery times is often critical to ensuring they will place orders. There is plenty of evidence that customers are increasingly fickle and will move on to another supplier if the items they want do not appear to be available, or will be delivered too slowly, even if that means paying slightly more. Ensuring stock availability and visibility is therefore a mission-critical priority for manufacturers and their suppliers. Yet few manufacturers appear to offer these facilities on their websites.

While customer-facing processes may be the most important there are good reasons for improving the control of stock in its physical storage environment. Primarily this is to provide the 'true' stock position but there are also many other reasons related to costs. Warehouse space costs money, no matter what size the business. Optimising stock levels helps to ensure this space is used efficiently. This could mean reducing warehouse space to control costs, but could equally mean using existing space better to support expansion or additional product lines without extra costs, particularly important if more product variations are offered.

Handling items also costs money. With better physical stock control the number, frequency and even the distance of movements can be reduced. The right systems will also support more efficient order picking and assembly by automating processes and removing errors, all of which can improve productivity. They can also enforce stock rotation, for example managing first-in-first-out, which can be important for products with a limited shelf-life.

Similarly, by collating and tracking important product-specific information such as batch number or production date they support traceability. This can be important for customer service but will also help in the event of returns or recalls. Reporting and analytical tools will provide insights that enable better decision making and service innovations based on real evidence.

The challenge facing many manufacturers is how to implement robust applications that support their business requirements without adding complexity and cost. Many of these businesses might only require back-office functionality while others will also want to support customer-facing and web-enabled processes. In practice, businesses have four broad options.

First, an enterprise warehouse management or ERP system with an extensive set of functions. These are widely used in traditional manufacturing businesses, warehouses and distribution centres. They can be large, feature-rich and complex and are typically implemented by configuring a core application with additional requirements specific to the customer's operation. This can be a lengthy and costly process which makes them beyond the means of all but the largest businesses.

Second, the stock control functions of e-commerce or shopping cart applications can provide some limited stock control, customer-facing and web-enabled capability. While these might offer an interim solution to get the business up and running, few if any include the full set of features that provide a long-term solution to the needs of a growing business. This is understandable because physical stock control is not the speciality of these systems' vendors.

Third, many start-ups simply manage their stock using paper-based systems or spreadsheets. These can be effective and many warehouses still use them despite the electronic alternatives available. However, for businesses who need to share information or maintain an online presence they offer little or no potential for providing the real-time information. There are also limitations in the back office, where such simple systems can easily lead to errors and inefficiencies that take time and money to put right.

Another option is to utilise the service of a distributor or fulfilment provider who operates the warehouse function on the manufacturer's behalf. These operations can interface with business's other systems to present a seamless customer experience. While this approach has merit, it is unlikely to be suitable for many manufacturers, the majority of whom are likely to want to retain ownership of their stock, supply chain and associated data.

A better solution for many smaller and growing manufacturers would be a specialist cloud-based application that can integrate with other in-house and third-party systems and website front-ends to support a feature-rich, warehouse-centric stock control function. This would enable greater levels of customer service in terms of stock visibility but would not become a burden because the core service would be hosted and supported by the application provider.

At the same time, it would allow the manufacturer to retain ownership and control over their warehousing and stock control operations as well as the associated data. It would enable new levels of back office efficiency that, taken with the low implementation costs and monthly pricing associated with cloud services, would simplify cost justification and shorten the return on investment.