Anise Madh is the GM of LeanSwift a division of Wirpo, global leader in e-commerce and mobile solutions for Infor CloudSuite ERP M3 and LN.
GETTY
The pandemic has caused a sea of changes for the manufacturing sector. Inflation spiked, and a labor shortage ensued. Manufacturers relied on—and continue to count upon—technology to better manage everything from labor challenges to asset management to supply chain forecasting. Companies pivoted from a just-in-time (JIT) inventory management system to a just-in-case (JIC) operating model.
Although most of the technologies that help manufacturers increase overall efficiency and decrease costs have been around for decades, it seems that some companies are hesitating to adopt them because they believe the short-term disruption outweighs the long-term benefits.
If that sounds like your company’s mindset, consider pivoting and leaning into manufacturing-specific technologies and process changes to help you compete and succeed in a post-pandemic world.
There’s a reason a seemingly countless number of articles have been published about the labor shortage and inflation over the past couple of years. With a U.S. civilian unemployment rate of 3.4% in April, employees are difficult to find and keep. Although attracting and retaining manufacturing workers was problematic pre-pandemic, it’s even tougher now.
And while inflation is cooling at 4.9% in April, it spiked at 9.1% last June. Along with unprecedented, pandemic-induced supply chain disruption, inflation sent the price of raw materials soaring so companies’ cost to borrow money and build up inventory has increased.
To get through challenging times, savvy manufacturers turned to warehouse management systems (WMS), human capital management (HCM) and/or enterprise asset management (EAM) solutions. Here are how these technology tools help.
• WMSs make labor-intensive tasks like picking, packing and shipping goods quicker and more efficient. Among other benefits, WMS technology helps manufacturers (and distribution centers) better organize the warehouse, provides inventory transparency and increases employee efficiency by taking on repetitive, mundane and time-intensive tasks so fewer workers can concentrate on higher-value duties.
• HCM solutions and practices can help you unlock workforce potential and increase employee productivity. They identify gaps in employees’ capabilities, focus recruitment efforts toward filling those needs and help companies train, develop, manage and retain employees, which is critical to attain your business goals.
• EAM solutions help manufacturers proactively predict and schedule maintenance of machinery and other assets like IT hardware and software to increase their longevity. EAM tools use predictive asset performance data to reduce downtime and provide mobile functionalities for field service technicians, among other features and benefits.
It's easy to see why manufacturers increasingly invest in and implement these solutions and others to offset the labor shortage and inflation.
Further, the pandemic prompted a marked change—a before-and-after for how manufacturers operate.
Decades before and leading into the pandemic, manufacturers focused on a JIT inventory management system prioritizing cost-containment, particularly since finished goods are usually the largest asset on their books. This “pull” system, also known as lean manufacturing, works well with a smooth supply chain.
However, supply chain disruptions of the past three years turned this line of thinking upside down as companies have largely pivoted to a JIC inventory operating model in which companies keep large inventories on hand and resiliency trumps cost. JIC is referred to as a “push” inventory system because purchases are not based on demand and help companies withstand an unpredictable supply chain.
After all, who will forget the computer chip shortage and demand that prevailed in the second half of 2020 and into 2021? The chip scarcity forced the massive manufacturing industry, especially the automotive and industrial sectors, to languish and lose money.
Although the JIC inventory strategy is more expensive than lean manufacturing, most companies are choosing the former so they don’t lose suppliers, customers and potential revenue.
To transition from a JIT to a JIC operating model, technology is key. Solutions like inventory optimization and/or demand forecasting tools can help companies with the accuracy of their forecasts, anticipating stockouts and tracking excess stock to prevent overstock. Ultimately, the improved visibility is what unlocks the deeper benefits of this model, like more detailed reporting, inventory management and smoother production lines.
Potential risks of using a JIC inventory management system include tying up more resources, being left with unsold inventory and adapting to market changes quickly. But, again, it’s all about visibility. With great visibility into a JIC supply chain, leaders can minimize the potential negative impact of keeping more inventory in stock.
If you have yet to invest in game-changing technology to ease inflationary pressures and the ongoing labor shortage, think again. The United States has 1.97 million fewer Americans working today than in February 2020. Technology can help fill the worker void.
But to ensure that your business reaps the most benefit from tech adoption, there are a few key qualities to look for in a solution: success stories, applicability to the industry, ease of implementation and integration and understanding of the solution’s scalability. Taking the time to understand the solution comprehensively around these factors can make all the difference between an expense and an investment.
Further, if you favor a JIT over a JIC inventory management system, the cost of doing business might be less. But what’s the price you’ll pay if supply cannot keep up with demand? Ultimately, customers lost to competitors and, therefore, lost revenue.
Consider seeing change this way: It’s a potential three-to-six-month disruption—not destruction. After all, look at what happened to Blockbuster when it decided to play it safe and refused to change. Don’t get left behind.
© OfficialAffairs
