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Data Analytics in Manpower Intensive Operations Like Warehouses and in Factory Logistics

The document discusses how data analytics can be used to improve operations in warehouses and factories through inventory management. It describes several key metrics that can be analyzed through a Warehouse Management System, including demand forecasting, inventory carrying costs, inventory turnover, and cash-to-cash cycle times. Analyzing these metrics can help businesses optimize ordering, avoid stockouts, reduce costs, and improve cash flow.

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74 views3 pages

Data Analytics in Manpower Intensive Operations Like Warehouses and in Factory Logistics

The document discusses how data analytics can be used to improve operations in warehouses and factories through inventory management. It describes several key metrics that can be analyzed through a Warehouse Management System, including demand forecasting, inventory carrying costs, inventory turnover, and cash-to-cash cycle times. Analyzing these metrics can help businesses optimize ordering, avoid stockouts, reduce costs, and improve cash flow.

Uploaded by

SD
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Data analytics in manpower intensive operations like warehouses and

in factory logistics

A Warehouse Management System (WMS) is to be placed in the premises, which would capture all
data regarding the portfolio of products present and the order schedules. The WMS would keep a
track of all the incoming and the outgoing materials both from the suppliers as well as the customers.
The data related to the inventory could be utilised in the following ways as mentioned below:
 Analyze which products among the portfolio sell more and quicker, so the products to be
produced are then decided upon more judiciously. This will actually help the company to
identify and produce the correct mix of products which will reduce both the inventory costs as
well as improve the revenues too. Also would help in investing resources at the right place.
 Analyze demand of different products with respect to different trends, eg seasonal, events
based, economy based and others to stock that much amount and reduce the delivery time.
With a proper analysis of the past data and suitable forecasting methods, there could be quite
a reasonable prediction of the future demands of the products at various points in time. With
this knowledge, adequate production and proper stocking of the required products could be
done in advance which would actually lead to lower delivery times too in turn. This further
would increase customer satisfaction as well as improve goodwill with him/her.
 With the help of advanced predictive data analytics, determination of when a particular order
would come could be determined. With this information, it would help the company to be
prepared in advance in anticipation of the orders and hence in turn to be prepared for
delivering upon these orders on short notice as soon as the orders are placed.

To look in detail, we have:

Demand forecasting
Demand forecasting helps predict how much stock we’ll need to carry in the future, based on past
trends and sales. Cloud-based inventory solutions with demand forecasting features can help us
analyze such trends in order to avoid underestimating how much stock we’ll need, and therefore
losing potential sales.
There are many methods that inventory management analytics software use to analyze inventory data
to inform demand planning, such as the time series analysis model, which analyzes historical data to
identify seasonal variations and trends in order to inform future inventory decisions.
Maintaining a high level of demand forecasting accuracy can protect the supply-chain in the
following ways:
 Having accurate product availability prevents spending more on safety stock.
 Reduction in need for clearance sales.
 Forecasting can result in enhanced efficiency in warehouse operations such as improved
employee scheduling and fewer surprises in production goals.
 Analyzing forecasting results can help businesses adjust their strategies in order to match their
competitors.

It’s important to remember that demand forecasting is not a definitively accurate measure when
measured alone. However, using demand forecasting features can act as a critical tool in helping us
achieve business goals such as reduced waste and elevated sales volumes.

Cost of carrying inventory


Most businesses will have inventory in stock that has not yet been sold or shipped, and the cost of
carrying this inventory is one of the most important that inventory management analytics features can
help manage. Not only can monitoring and measuring our carrying costs show us how much profit us
could be losing out on, it can also help us identify areas of the business where adjustments should be
made, such as production levels. There are several costs associated with carrying inventory, such as
the following:
Holding costs: Related to the space and storage of inventory, including rent, taxes, utility bills.
Handling costs: Associated with the labor used to move, pack, and organize inventory.
Capital costs: These include all costs (and losses) related to the investment in inventory, such as lost
opportunities to use working capital.
While carrying costs are somewhat unavoidable, measuring them via inventory management analytics
will help us future proof business decisions, show how cost-effective our operations are, and help us
stay competitive through reducing costs. With such a large proportion of total inventory values going
towards carrying costs, businesses that don’t measure them are potentially jeopardizing their entire
supply-chain.
Inventory management tools can help businesses determine when their reorder point should be, which
can help avoid overstocking and paying more in holding, handling, and capital costs.
Given that carrying costs are one of the largest costs to small businesses, measuring and analyzing
these costs is essential in protecting the efficacy of the supply-chain. Businesses that fail to analyze
carrying costs risk operational shortcomings by failing to pinpoint where in the supply-chain the
business is taking losses. Invest in inventory management software to ascertain where us can reduce
excess inventory.

Inventory turnover
Inventory turnover is one of the key metrics in measuring the health of our business: in general, a
higher inventory turnover speaks of a healthy business, and a lower turnover indicates inefficiencies
in inventory management.
Healthy turnover rates differ by industry, but here’s the bottom line: our level of inventory turnover
impacts on our level of profit. Not only does measuring and analyzing this metric gives us a better
idea of market demand, it’ll also help determine what areas we need to work on to improve our
turnover rate.
Measuring inventory turnover can highlight where inventory planning activities could be improved,
and where profitability could be increased. It also presents an opportunity to measure important
business trends. For example, maybe a high-value product that was popular last year has received far
less demand this year, and therefore a significant amount of capital is tied up in unsold and obsolete
merchandise. Regularly review the stock in order to determine which products are selling well, and
those which are becoming or are already stagnant stock. This will decrease the opportunities for our
capital to be tied up in unsellable stock, and will also reduce handling and holding costs.

Cash to cash cycle time


The cash to cash cycle means the time it takes between paying our suppliers for our inventory to
recovering payments from our customers. In a study conducted by CFO on cash to cash cycle
completion, the “worst-performing” organizations needed 80+ days, while the “best-performing”
organizations needed just 30 days or less.
Our cash to cash cycle time is an important metric to measure and analyze, as it demonstrates how
quickly our business is able to recoup money in order to invest again. Analyzing this metric can also
indicate where there are detrimental parts within the process.
For small businesses, using inventory management analytics to measure their cash to cash cycle is
even more important given their more restrictive cash flow. Delayed payments from customers can
mean the difference between being able to reinvest in stock and needing to source other means of
buying new stock. The health of our cash flow is also important, as it’ll determine how able we are to
pay staff, fulfill orders, and reinvest on time.
Take a good look at our invoicing processes: what works, and what doesn’t? Avoid using manual
methods in our accounting processes, and look to digitalize these where possible. Think about the
following when getting started with cycle to cycle time analysis:
 How our products are organized e.g. by supplier, category, or product
 How often and at what point in our sales cycle we’ll count our stock levels.

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