5 Inventory Management Stats Worth Knowing
Brian Hoey - March 26, 2019
Effective supply chain management is about getting the right goods to the right place, at the right time, in the right condition. This is easier said than done. Why? Because there are a number of intermediate steps separating a finished product from its final destination, including warehousing and shipping, both of which can be complex logistical problems in their own right. The mark of a successful supply chain is its ability to optimize each element in turn before integrating the different pieces into a cohesive, profitable whole. Today, we’re going to focus on the warehousing side of the equation. For many businesses, this represents the thorniest part of the entire value chain—a touchpoint for which effective tracking and management is particularly difficult. Don’t believe us? We’ve got the stats to prove it.
63% of the time
How frequently inventory is accurate in retail businesses. This number, of course, does not refer to manufacturers in particular, but it seems unlikely that the figures would be all that different. This statistic speaks to the lack of visibility that can often plague inventory management workflows across industries—after all, if your inventory log is inaccurate more than a third of the time, that means that there must a communication failure at some critical point on your logistics chain. Either inaccurate (or inaccessible) production schedules are resulting in the wrong goods in the wrong proportions winding up in your inventory, or your ability to track your inventory as it comes in and goes out isn’t up to the mark. Either way, you're putting yourself in a position where you simply don’t know whether you can fulfill a particular order or whether you need to restart your production flows to create more of a given product.
1/3 of businesses
Will miss a shipment deadline because they’ve sold an item that wasn’t actually in stock. This statistic should really hammer home the implications of the one above. Low visibility is a fact of life in the inventory management flows for a huge number of companies, and the consequences can be serious. Specifically, without the ability to gain control over your own inventory levels, it becomes impossible to effectively manage customer expectations. If a customer tries to place an order, you have no idea whether or not you can fulfill that order (and if so, in what time frame you can do so) unless you know which goods are where, when. The effect of a late delivery that stems from this kind of inventory oversite isn’t just potential fees incurred while rushing to get the item out at all, it’s the disruption to your other production processes, your sourcing, and your other shipping flows that could have a ripple effect through your existing operational plans.
1,600 new warehouses
Were added in the U.S between 2013 and 2017. So far we haven’t been painting a particularly rosy picture of inventory management practices within the larger context of supply chain management, but the fact remains that, at least in some parts of the world, business is booming. As the global value chain becomes ever more complex, the number of physical nodes on that value chain continues to increase. This influx in warehouse facilities could be a sign of overall abundance, but they could also suggest something about the increasingly diffuse nature of supply chain management. As companies are working towards agile-lean models in supply chain management, their transport networks are adapting to keep up. Let’s say, hypothetically, that your business had a digital transport flow that incorporated data streams from numerous smaller warehouses; when an order came in, instead of relying on pre-set transport plans, you could take a dynamic approach to order fulfillment, bundling shipments and routing freight in a smart, adaptable manner, leading to decreased overhead and improved on-time performance.
25% more manufacturers and retailers
Were investing in inventory management technology in 2016 compared to 2017. The vision that we briefly sketched out above—of a dynamic transport logistics flows that let you identify the optimal plan on the fly—could be one result of the kinds of investment we’re talking about. After all, one of the best ways to build up the level of visibility required for the type of planning flow under discussion is to adopt a Postmodern ERP mindset to connect all of your existing IT into one cohesive, interoperable unit. By creating the kind of digital infrastructure that helps you to collect, share, and analyze data from your production and shipping processes, you put yourself in a position to digitally map all of your inventory operations in virtual space. In this way, you ensure that, even without physical access, you can maintain a thorough accounting of which goods are passing in and out of your warehouse at which time. Doing so can be foundational for other supply chain management improvements, such as the introduction of advanced analytics into your planning processes.
About half of manufacturers
Were implementing RFID chips for inventory tracking as of 2015. No doubt that number has gone up in recent years. This is a perfect encapsulation of the ways that technology can help transform your inventory operations. If you’re working with anything resembling the level of IT integration that we discussed above, you can use RFID chips or IoT sensors to add a new data stream to your centralized monitoring and planning activities. In so doing, you suddenly gain a clear picture of exactly what’s being stored and moved at any given moment. In so doing, you put yourself in a position of increased certainty with regard to orders. If something is out of stock, you’ll know it right away and can refrain from selling any more of it until your production processes have had time to catch up. If you’re wondering whether it’s possible to bundle a particular shipment more efficiently, the answer will be right at your fingertips. In this way, inventory management is transformed from a potential liability into a driver of future value for you and your customers.