Five Ways Digital Transformation Will Shake Up Inventory Management in 2021

We always knew digital transformation in inventory management would continue to grow in the manufacturing space, but the unpredicted challenges amid COVID-19 catalyzed that need. In 2021, manufacturers are tasked with ramping production back to the place it was in 2019—a level that took decades for some to establish. These companies are turning to technology to quickly re-establish and sustain best practices critical in today’s complex supply chain. Cloud-based software, AI-driven technology, and smart, standardized work have gone from a nice-to-have to a company-wide mandate.

As manufacturers ramp back up and make their operations “disruption-proof,” here’s how I predict manufacturing will transform in 2021. 

1. Success will get a new definition and the center of control will shift. 

In 2021, just-in-time inventory will be redefined as manufacturers realize success isn’t about achieving zero inventory, but being able to quickly scale inventory up and down, adjust on the fly, and make the best possible inventory decisions for the business at any given time. If 2020 taught us anything, it’s to expect and prepare for the unexpected because supply and demand can change literally overnight. Especially during times of unpredictability, manufacturing companies can take control back of their inventory operation with a renewed focus on the factory—the strategic epicenter for delivering on-time to customers and operationalizing efficiencies. 

2. Digital transformation will move to the factoryfinally.

And because the focus will shift to the factory, so will digital transformation. In this case, digital transformation will mean equipping supply chain teams with the tools and processes they need to do their jobs to the best of their ability, regardless of whether they’re on-site or separated by oceans, and whether demand is steady or volatile. 

As some companies continue to operate remotely, with fewer people and more surprises, they’ll invest in digital infrastructure for factory efficiency. Manufacturing teams will be able to understand inventory requirements, anticipate demand fluctuations, establish remote war rooms to respond quickly to changes, and automatically prioritize which tasks their teams must execute first.

3. Connected factories and inventory intelligence will solve globalization and cross-site challenges.

2021 will be the year manufacturers think beyond shop floor automation to cloud-based connectivity for their operation. When manufacturers use inventory intelligence to see all of their information in one place, rightsize inventory in each location, and enable cross-site visibility, the result will be a connection of optimized factories that arguably offer even more power than that of the typical “smart” factory. 

The value of this power?  The ability for supply chain leaders to measure and optimize inventory levels and metrics at multiple sites. Then, supply chain leaders can quickly address business-critical interruptions, like critical shortages, at one site by immediately moving over inventory from a sister site with excess material. Connecting factories through technology and standard work is the key to achieving greater flexibility, efficiency, and actionability, especially for global organizations. 

4. The factory management tech gap will be filled, and just in the knick of the time. 

With industrial IoT connections expected to reach $37B by 2025, the potential for real-time information and automation in the factory is compelling.

Manufacturing leaders are being asked to optimize inventory in an unimaginably complex supply chain–despite a major gap in solutions for this problem. Most investments in factory technology to date have been centered on robotics and automation in the assembly, packaging, and logistics processes. 

But what about decision-making for the factory?  Factory leaders say that they are drowning in data from disparate systems, but remain thirsty for actions.  In 2021, manufacturers will invest in emerging factory software to replace constant firefighting and missed opportunities with total visibility, unencumbered decision-making, improved working capital, and more. The result: Empowered supply chain leaders equipped to execute the right decisions and optimize inventory daily, even on the chaotic factory floor. 

5. Manufacturers will finally ditch Excel. 

Eighty percent of manufacturers’ data sat unused in 2020. Why? Because the information was housed in static spreadsheets. Research shows productivity gains of 30-40% await the companies that ditch Excel and manual numbers crunching, create total visibility into inventory information across the organization, and make that information actionable and available at every person’s fingertips. 

We know that static spreadsheets don’t scale and are error-prone—they don’t allow teams to react quickly to daily changes. When teams need to reduce inventory levels and stop critical shortages fast, they need to prioritize, troubleshoot, and collaborate in real-time. Faster, more confident decision making around inventory management is every manufacturer’s dream. In 2021, more companies will finally realize achieving this dream requires more than a standard, low-cost office technology product, and take the plunge into plug-and-play, cloud-based analytics to turn their data into actionable recommendations.


2020 drove new manufacturing priorities and massive volatility. 2021 is finally the year of the factory, which holds the keys to solve challenges left behind by the most unprecedented time in recent manufacturing history. 

The good news: Some top manufacturers are already well on their way, using digital transformation in factories as their competitive advantage. Read their stories here.