Supply chain: Who’s at fault when manufacturing production plans are scuppered by raw-material delays – and could IoT help?
Where along the supply chain does blame lie for the failure of aircraft manufacturers Airbus and Boeing to keep pace with demand for new passenger planes? According to a report this week in the Wall Street Journal, executives at these companies say it’s the fault of their suppliers. Their own order books are bulging, they say, but they simply can’t get the parts they need – from engine components and seating to toilets – to finish jets and deliver them into the hands of the airlines.
It’s not just the aviation business where this kind of finger-pointing is seen. In the technology sector, Apple had problems last year keeping up with demand for the Apple iPhone 7 Plus (especially in the brand new Jet Black finish), as did Google with its Pixel smartphone. Fitbit and GoPro both left customers waiting for new fitness trackers. All four companies said that supplier delays had played their part in scuppering production plans.
IoT technologies could hold the key to ending the ‘blame game’ for good. Asset tracking is nothing new, of course, but new levels of connectivity could do much to streamline the process of getting inventory and raw materials into the manufacturing plant in the right quantities and at the right time.
In 2015, logistics company DHL and Cisco predicted that IoT technologies could have an impact of $1.9 trillion – or more – on supply chain and logistics. At least some of this impact needs to be felt in the area of inventory management.
After all, it’s no good a manufacturer blaming suppliers when production grinds to a halt, if the ingredients or components it needs have already arrived at its plant, but are stored in the wrong location. And if supplies of raw materials are running perilously low, it’s not really the fault of suppliers if they are unable to restock in sufficient quantities at short notice. In other words, they need more warning. It’s only fair.
The barcodes once used to convey basic data about large incoming shipments of inventory are now being replaced at speed with more modern sensors and tagging, able to convey more sophisticated data about the arrival, location and even condition of much smaller collections of inventory – in some cases, right down to individual parts or components, if these are of particularly high value.
There are many advantages to creating smarter warehouses with the latest technologies, according to a recent report from Samsung. “Devices, sensor and radio-frequency identification (RFID) tags can enable warehouse managers to know the exact location and progress of any product at any time. ‘Hands-free’ wearables can allow workers to move about and access information and instructions from anywhere in the warehouse without being constrained by workstations,” writes its author.
“Additionally, investing in IoT can reduce the use of manual labor, increasing speed and shipping accuracy and offer companies an opportunity to obtain unparalleled visibility into inventory and supply chains.”
This suggests that IoT can help as much with measuring demand for finished goods as it can with monitoring the supply of raw materials with which to make them.
Supply and demand
“Manufacturers need to manage warehouse inventory effectively in order to meet fluctuating customer orders,” says Peter Laplanche, director at Datatrade, a technology provider to warehouses and retail distribution centers. “Without the right tracking and visibility in place, they can find themselves either without enough stock to satisfy demand or overstocked.”
“Just looking at raw materials replenishment, for example, we see an area where the IoT and access to real-time information could really help manufacturers gain greater visibility and control by better mobilizing their workforce and improving communication.”
He gives as an example a T-shirt manufacturer that must adjust to fluctuations in demand, often in response to changing weather conditions or popular events such as music festivals, for example: “With sensors and RFID tracking in place, the plant manager has visibility of not only current stock levels but also imminent T-shirt orders, thus enabling them to determine how much raw material is needed and when.”
A welcome level of visibility
There are plenty of signs that many companies would welcome this kind of visibility. In Zebra Technologies’ Warehouse Vision Study for 2016, over half of the 1,300 warehouse IT and operations professionals surveyed said that they expect increased investment in real-time location systems that track inventory and assets throughout the warehouse. More than three-quarters expect this by 2020.
Where this kind of data is shared with suppliers, typically via the cloud, it presents an opportunity for them to start restocking proactively, with the goal of keeping inventory at pre-approved levels. And when these suppliers are hit by unexpected events, this kind of visibility can enable their manufacturing customers to change plans quickly, says Brian Nella, a senior director at supply chain management company GT Nexus:
“IoT will turbocharge supply chains with hyper-granular visibility,” he says. “When ‘black swan’ events occur, like the Hanjin collapse or the Japanese earthquake and tsunami, [manufacturers] are informed about where their goods are and can minimize the risk of any major disruption to their supply chains by rerouting goods/components and using the data at hand to make decisions in real time. Perhaps even more impactful, IoT level visibility can eliminate some of the day to day risks and friction in the global supply chain.”
This kind of visibility helps every company in the supply chain. In some situations, suppliers are legitimately at fault, but not in every case. Either way, manufacturers might want to look at their own inventory management practices before laying the blame elsewhere. And where suppliers truly are at fault, it helps if manufacturers have a good record of rich IoT data that clearly shows that the bottleneck truly is another company’s responsibility.
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