The Distributed Inventory Model: How Decentralization Can Optimize Your Supply Chain
Brian Urban – President and CEO, SencorpWhite
A variety of industries face similar challenges managing high-value inventory and controlling operating costs, including 1) inefficient materials management, 2) lack of reporting and internal communication about inventory status and usage at the point-of-use, 3) security against loss by human error or theft, and 4) regulatory compliance, such as need for confidentiality. Even innovative companies typically adhere to a “traditional” inventory management model, with significant inefficiencies negatively impacting forecasting, security, and the overall supply chain. The lack of system integration and data availability throughout the supply chain amplify the general costs of managing inventory(i), and a lack of appropriate technology precludes a more efficient vendor-managed inventory (VMI) approach.
Issues in Inventory Management
A typical supply chain includes the intake of materials, cash intensive inventory storage,
and the delivery of a product or service to a customer. Managing inventory through these phases involves the internal flow of information and resources, and it is widely accepted that “information about the movement of goods [in a supply chain] is as important as the actual movement of goods.”(ii) However, traditional systems incur heavy costs along the way.
Costs associated with procurement include staff time for order processing, planning, resolving inquiries, shipping and handling;(iii) and the d irect cost of the raw materials from suppliers. In the United States, storage of inventory typically costs 25% to 35% of the total inventory value(iiii) , and carrying excess inventory increases operational costs further, including the cost of storage space, administrative activities, physically moving inventory, and expired or quarantined medicines or medical devices. Security for high-value inventory is critical to avoid theft and ensure confidentiality. In addition, breaches of security are costly as well.
Current Solutions: Not Optimized for High-Value Inventory
In a traditional supply chain, inventory is stored in a central or satellite stock room and tracked by internal inventory control systems. Point-solutions have also existed for some time, including one spearheaded by Duke University in 1993, in which an automated pharmacy (APS) system did not deliver a single incorrect medicine and tied drug dispensing with actual drug usage.(iiiii) Staff time costs, human error, insufficient security for coveted materials like medicines, and lack of transparency increase operational costs, and hinder competition versus other companies’ supply chains.(iiiiii)
What is Distributed Inventory?
As a designer and manufacturer of industry-leading automated storage and retrieval systems and software, SencorpWhite developed a new supply chain solution called Distributed Inventory. Distributed Inventory uses advanced technology to allow high-value stock to be safely stored, managed, and securely distributed at the point-of-use, and decentralizes the supply chain while bolstering security, tracking, automation, and storage capabilities. Distributed Inventory gives greater data reporting and transparency, real-time reporting, and monitoring of inventory through intelligent automation and integrated auto-identification (RFID) tracking.
How Does Distributed Inventory Work?
Distributed Inventory uses automated storage and retrieval systems to bring requested items directly to the operator, increasing throughput, securing high-value inventory in a closed environment, and reducing inventory loss, labor costs, and wasted space.
Vertical and horizontal carousels and vertical lift modules are the preferred hardware for secure, automated, and flexible, high-capacity storage in a Distributed Inventory model. They can be customized for different applications, including a “pass-through” or an airlock, and can also serve in rugged or remote locations, housed within a shipping container on-site.
The Genesis software on SencorpWhite carousels enables a Distributed Inventory supply chain to monitor and report on inventory levels, usage, and replenishment in real-time, providing accurate data immediately available to materials departments and vendors. In the Distributed Inventory model, stock is held in a secure location (carousel, VLM, etc.) while the software monitors system-wide inventory and transactional (item, quantity, etc.) and user (name, time, department, etc.) data.
Accurate, real-time data is provided by radio frequency identification (RFID), using small electronic tags, to transmit inventory data via a radio signal to RFID readers.(iiiiiii) RFID technology eliminates the need to manually scan items, saving time and reducing errors
and theft.
Conclusion
Distributed Inventory is a new model that decreases inventory management inefficiencies and costs through:
- Real-time tracking and usage reporting
- Adoption of automation, remote monitoring and auto-scanning
- Security for point-of-use and dispensation
- Ability to adapt a VMI model;
- Ability to adapt with ERP or other functional software systems
Enabled by advanced hardware, software and Auto-ID technology, and easily integrated into existing systems, Distributed Inventory can meet the particular challenges facing supply chain managers in a diverse array of industries.
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Martin Christopher, http://www.martin-christopher.info/news/reducing-costs-through-collaborative-working-in-the-supply-chain/ , 2011.
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