As supply chains grow increasingly global and complex, having the right parts at the right time has become imperative to keep supply chains running smoothly. Yet, even as digital transformation initiatives rapidly expand across the factory and supply chain, operational procurement teams continue to be left behind.
I’ve spent over thirty years working to develop systems that leverage lean manufacturing best practices to drive major improvements in working capital, customer delivery, and operational productivity. And the last fifteen years have been solely dedicated to building out-of-the-box solutions to optimize the modern factory. In that time, I’ve been lucky enough to work in over 15 countries, empowering factory workers to break through the noise of their ERP systems by deploying technology to improve their daily work.
With a front-row seat in developing execution-focused analytics solutions for modern factories, I’ve learned two key lessons that have shaped where we’re heading next.
Lesson one: The factory can no longer be viewed as a black box
Fifteen years ago, when I developed my first solution for the modern factory, Factory Logic, digital adoption was few and far between. There also weren’t many supply chain team members who understood the strategy and technology behind lean procurement and demand-driven inventory optimization. With static, disparate data being pulled manually from multiple ERPs, teams often lacked the decision support tools and analytics required to optimize daily activities and establish visibility into inventory opportunities and performance.
This meant that factory procurement teams were left to develop their own solutions, most often using Excel to fill the gap as they reactively responded to shortages and excess inventory. The factory is viewed as a black box by most enterprise supply chain planning tools, and this has created challenges for factory management who are constantly working to achieve optimal performance in quality, cost, and delivery (QCD). I realized early on that this lack of factory analytics, combined with cross-site connectivity to the rest of the supply chain, caused materials shortages, high inventory, and worker inefficiency. This was one of the biggest ‘aha’ moments in my career—the key to global supply chain efficiency is a connected factory.
Today, we know that spreadsheets are static, don’t scale, are error-prone, and don’t allow teams to react quickly to daily changes. But still, factory supply chain teams turn to these homegrown options when they don’t have a readily-available solution to help them execute. When teams are tasked with reducing inventory levels and stopping critical shortages, they need a crystal clear view of supply chain operations so they can prioritize, troubleshoot, and collaborate in real-time. Nowadays, predictive and prescriptive analytics can help teams achieve all three variables in the QCD equation. In other words: teams achieve inventory reduction, shortage elimination, and fewer mistakes.
Lesson two: Supply chain analytics need to be actionable for teams working in the factories
Thanks to the digital transformation currently taking place in manufacturing, we’re seeing supply chain tools rapidly evolve from static spreadsheets to dynamic platforms that bring together advanced analytics, best practice workflow, and real-time collaboration to solve critical operational issues. For years, manufacturers have invested in solutions like Integrated Business Planning (IBP), demand planning, scheduling, and more. From the perspective of developing a modern, lean factory, this planning is helpful in understanding a path to reduced inventory or improved on-time delivery.
However, these tools still don’t tell teams how to fix inventory and delivery issues, especially when plans change.
Factories have to flip the script on supply chain management, focusing on getting the execution right. The critical component is leveraging purpose-built tools to prioritize and explain the actions that will allow teams to execute on improvements in excess inventory, customer delivery, and productivity at the same time. Only then will every procurement team member be empowered to proactively take action on their operation’s most urgent inventory issues, and teams can deliver quality products on time.
Putting the puzzle together to take control of factory quality, cost, and delivery
With both of these lessons in mind, the focus of supply chain improvements has to be execution in the factory. The deployment of purpose-built solutions that combine domain expertise, advanced AI-powered analytics, and cloud computing will help teams identify the top inventory opportunities and prioritize daily actions. With this new superpower, teams can cut through complexity to solve real challenges, fast.
Top supply chain companies use this approach to quickly reduce shortages and excess inventory:
- One aerospace company used LeanDNA’s visibility, insights, and automation to surface the organization’s most impactful opportunities and develop workflows to take action on them. As a result, the team achieved a 36 percent inventory reduction in just three months. This success story earned LeanDNA the 2020 NextGen Analytics Provider of the Year Award.
- Rev Group’s E-One used LeanDNA to gain visibility into inventory levels, automate manual processes, and provide teams with root cause analysis. They achieved a 39 percent shortage reduction in just seven months and freed up the buyer team to spend time on revenue-driving activities.
- ECI improved visibility and analytics to organize buyers into “Shortage Attack Teams.” They automatically prioritized shortages and viewed progress from a “control tower,” eliminating the black box. This enabled teams to stay productive, execute on time, and reduce shortages by 30 percent within six months.
These initiatives couldn’t have been solved with the traditional top-down approach. When advanced analytics is paired with an execution focus in the factory, teams can achieve higher quality, lower cost, and improved on-time delivery.
The factory is the future of supply chain excellence
As supply chain analytics and functions evolve over time, those who leverage technology and efficient execution in the factory can use their connected ecosystem to finally break away from the noise of their ERP data and achieve better efficiencies. The ability to see, analyze, and take action on inventory issues at the factory-level, across factories, will become even more crucial to gaining a competitive advantage as supply chains become more complex.
With a new approach, every supply chain can leverage prescriptive analytics to connect their factories, deliver quality products on time, and reduce excess and critical shortages before they impede production.
Want to learn how to put the factory at the heart of your strategic operations and drive real inventory management results? Download our white paper, 5 Best Practices to Reduce Inventory by 10% in 90 Days, to learn how to define inventory targets and maximize working capital efficiency.