October 03, 2017
If the notion of folding flying drones into your warehouse inventory management approach sounds far-fetched, think again. In August, Massachusetts Institute of Technology (MIT) revealed a new way to combine drones and RFID technology to improve stock-keeping processes. Dubbed “RFly,” the system enables small, safe, aerial drones to read RFID tags from tens of meters away while identifying the tags’ locations with an average error of about 19 centimeters.
MIT researchers envision the system being used for continuous monitoring, to prevent inventory mismatches, and to find the location of individual items in large warehouses. By incorporating drones and RFID into the stock-keeping process, shippers may be able to more effectively optimize inventory levels, reduce stock-outs, improve stock visibility, track orders, and reduce the possibility of human error.
“In 2016, the U.S. National Retail Federation reported that shrinkage—or loss of items in retail stores—averaged around $45.2 billion annually,” Fadel Adib, the Sony Corp. career development assistant professor of media arts and sciences, whose MIT Media Lab group developed the new system, told MIT News. “By enabling drones to find and localize items and equipment, this research will provide a fundamental technological advancement for solving these problems.”
Drones not your thing? Try this instead
Of course, solid inventory management doesn’t require an unmanned aerial vehicle and individual RFID tags. In fact, there are several best practices and technologies that, when used on a standalone basis or combined with other platforms, can significantly improve inventory management for today’s warehouses and DCs. Following are six of them.
1.) Before you invest, explore your current systems. “Inventory management doesn’t have to be overly complicated,” says Norm Saenz, managing director at the supply chain consulting firm St. Onge Co. In many cases, for example, it can be as simple as having an inventory management system that incorporates bar-coding and, in turn, enables real-time visibility of inventory.
“You can get this without having to invest too much money,” says Saenz. “In fact, most legacy software packages and enterprise resource planning (ERP) systems incorporate some level of inventory management. It’s not like you need a Tier One system to get good inventory management systems and support.”
2.) Start by establishing bin-level inventory controls. It sounds simple enough in theory, but Ian Hobkirk, president at Boston-based Commonwealth Supply Chain Advisors, says that this is a step that many shippers overlook. “Focus on knowing exactly what’s in every bin in the warehouse in real-time, all the time,” Hobkirk says, noting that a warehouse management system (WMS) is the best tool for the job.
“By using a WMS for bin-level controls, everything that come out of the bin gets tracked in real-time,” adds Hobkirk. “When you can achieve this, then you can start to move to cycle counting instead of having to conduct full physical inventories, the latter of which are usually huge events that hog resources and kill productivity.”
3.) Fold demand management and inventory optimization into the mix. For customers to be happy, inventory has to be in the right place at the right time. Carry too much of any SKU in the wrong place and you could wind up losing money and negatively impacting customer service.
To achieve this balance, Steve Banker, vice president of supply chain management at ARC Advisory Group, says that shippers can use traditional inventory management tools plus demand management and inventory optimization solutions. Together, these three pack a powerful wallop that shippers can use to address their inventory management challenges. “When you can get your demand management right,” says Banker, “you know to have your inventory in the right place and at the right times.”
4.) Consider adding GPS technology to your inventory management lineup. Most often used for vehicle navigation, satellite-based navigation systems are also being used to manage inventory in the supply chain. Saenz says he recently worked with a battery distributor that was using the technology to track inventory in its supply chain, and that the GPS system reports on the status and actual performance of inventory for the company.
“They wanted to know where their rental units were out in the market,” says Saenz, “and also the charging statuses and probability of failure for those units.” After testing out an RFID system that didn’t meet its needs, the company started using GPS instead and is happy with the results. “We’re seeing companies like Geoforce introduce solutions that can help track inventory out in the supply chain,” says Saenz, “where visibility isn’t always easy to achieve.”
5.) Give wearable scanning devices another second look. Wearable computers are helping today’s warehouse and DC workers become more mobile, hands-free and accurate in a world where smaller, more frequent orders are making their jobs more challenging than ever. But even with the proliferation of wearable scanning devices on the market, Hobkirk says a lot of logistics professionals are overlooking the technology’s true value.
These devices help with accuracy and control, but we don’t see them being used as widely as they could be,” says Hobkirk, who sees a high volume of shippers using handheld scanners for inventory management. Because operators have to physically pick these devices up—and then look at them and put them back down—companies miss out on the benefits that hands-free technology provides.
“Handheld devices are clunky and often lead to errors or situations where workers simply aren’t tracking all the transactions that they could be tracking,” Hobkirk says, noting that the cost of wearable scanners are now in line with those of handheld devices. “There’s really no reason not to use them anymore.”
6.) Start thinking about artificial intelligence (AI) and machine learning. ARC’s Banker says that he’s beginning to see AI (computer systems that can perform tasks that normally require human intelligence) and machine learning (AI that gives systems the ability to automatically learn and improve from experience without being explicitly programmed) applied to demand management solutions—a trend that could help improve forecasting for select time periods.
For example, if a warehouse or DC operation lacks the necessary level of SKUs for every supplier, these advanced options could help make more intelligent stock allocation decisions. He points to Terra Technologies, which was acquired by E2Open in 2016 and one of the early pioneers in such technology. “In a world where a lot more companies are running segmented supply chains,” says Banker, “when they’re short on something, those companies want the stock to go to their best and most profitable customers.”
Ace Hardware: Using technology to reduce inventory and stock-outs
Since it was founded in 1924 by a small group of Chicago hardware store owners, Ace Hardware Corp., has had quite an impact on the retail landscape.
Early on, for example, it began allowing individual stores to purchase merchandise in bulk in order to save money and to buy at the lowest possible price. This arrangement helped even the smallest stores compete more effectively in a marketplace where large, national retailers tend to have the biggest buying power.
Fast-forward to 2017 and Ace remains committed to continuous improvement in the inventory management realm, where it recently implemented a multipronged approach to managing stock for its international DCs. As part of that effort, the company implemented an inventory optimization solution from Blue Ridge Supply Chain Planning Solutions.
Brian Cronenwett, vice president of international logistics for the Oak Brook, Ill.-based hardware retailer, says that initiative was driven by the need to improve fill rates for its international retailers while also reducing stock-outs by 40%.
When shopping around for a solution that would help it meet those objectives, Ace Hardware started by looking at and then dismissing the idea of using a large, expensive planning tool for the job. “We were already using that for our domestic DCs,” says Cronenwett, “and knew that it wouldn’t be a cost-effective approach.”
After exploring several different technology platforms, Ace Hardware’s IT team narrowed the choices down to just three. Cronenwett says that after exploring the costs related to each choice, the company picked Blue Ridge. “We liked the look and feel of the user interface,” he adds. “It was a very user-friendly tool, as opposed to some of the stare-at-the-blank-screen options that we looked at.”
As a company that frequently deals with “lumpy” demand that can be difficult to predict in advance, Ace Hardware wanted a simple interface that didn’t rely on “13 different algorithms to get to the answers that we needed,” says Cronenwett. “We wanted a solution with one good algorithm that would allow the analyst to make quick decisions based on what he or she was seeing on the [screen].”
Using its new system, the retailer has eliminated about 80% of the time it once took to create POs for its vendors. And armed with the system-generated data—plus more time to do their jobs versus just creating POs—the company’s analysts are taking a more proactive approach to inventory management.
“Our new forecasting engine is more robust than anything we were using previously,” says Cronenwett. “In our lumpy environment, that means we no longer have to manually adjust to compensate for those fluctuations.”
Finally, Cronenwett says Ace Hardware is on pace to reduce its inventory levels by 16.5% this year while also reducing stock-outs by 40%. “We’re going to exceed our original goal,” says Cronenwett. “It’s great when you buy software and it actually works.”
About the author
Bridget McCrea is a Contributing Editor for Logistics Management
based in Clearwater, Fla. She has covered the transportation and supply chain space since 1996, and has covered all aspects of the industry for Logistics Management
and Supply Chain Management Review
. She can be reached at [email protected]