Can 3PLs Help Manufacturers With Inventory Management?
We spoke recently to Alan Amling, vice president for marketing, at UPS Logistics & Distribution, about how 3PLs can help manufacturers with inventory management. Here’s what he had to say.
Global Trade: How can third-party logistics providers help manufacturers with inventory management?
Alan Amling: There are three areas where 3PLs can help. The first is in helping customers plan their networks of manufacturing and distribution points. If the 3PL can get into this process up front to influence network locations, it can have enormous impact on inventory and transportation costs.
The second area is in the fundamentals of inventory control. The accuracy and visibility of inventory information is key. The 3PL has experience across many industries and can apply lessons learned with a customer to another.
The third is the ability to react in real time to inventory stocking quantities. That is important especially in the service parts logistics area. The service technician needs to have parts close to the point where he or she will be fixing a customer’s mission-critical equipment. Many 3PLs are good at adjusting inventory stocking quantities to replenish the network quickly and have product in the right location.
Q: What are the advantages to manufacturers to using a 3PL for inventory management?
A: Manufacturers and shippers are often unable to maintain the core skill sets and technology required to support network planning. This is something a 3PL does day in and day out. Another thing is something I mentioned before, sharing best practices. The third area is the technology to manage day-to-day inventory planning and rebalancing.
Inventory is the devil. You want to be able to meet all customer requirements with the lowest possible inventory level. Inventory sitting in a warehouse is not making any money. The less needed to meet customer demand the better.
Q: What kinds of technologies are put to use to manage these processes?
A: There are three main types of technology. The first is network planning technology that considers transportation costs, inventory costs, shipper locations, and customer locations to develop the best network based on tradeoffs of inventory and transportation costs.
Once the product reaches the warehouse the Warehouse Management System takes over. WMS allows companies to maintain accurate inventory controls and reconciliations and provides reporting back to customer systems at both the aggregated and the detail level.
Inventory planning technology applies sophisticated algorithms to analyze customer order data to determine how much inventory to maintain at which stock locations.
Q: Can you give an example or two of UPS clients that have been helped with inventory management?
A: We work with Triumph of North America, a motorcycle manufacturer, with a network of over 200 North American dealers. One of their challenges is to manage inventory at dealer locations. Another is to keep track of sales and inventory of parts, accessories, and apparel that they sell across different channels, through dealers, their own company website, and Amazon. How do they manage the inventory so they don’t end up with inventory all over the place?
UPS helped them set up one source of inventory at a UPS distribution center. Orders from their website, from Amazon, and from dealers are all controlled and managed from a single place housing the entire product catalog. They implemented that a couple of years ago and have seen tremendous savings in inventory.
Another customer is Carestream Health, a global provider of medical and dental imaging systems. They have service guarantees with their customers, so it’s critical that their field engineers have rapid access to repair parts. They had inventory at various locations, including with the field engineers.
They chose 70 of UPS’s network of 900 field stocking locations around the world and we helped them determine the level of inventory they need to keep at each. A second challenge involved how to rebalance the stock between all of these locations and do that with lowest amount of inventory possible. They came to UPS to manage that network on their behalf.
Q: What have been some of the most recent trends in this area?
A: Analysis of big data is creating better forecasting of customer demand to improve inventory planning. That takes into account point-of-sales data as well as many other inputs.
3D printing will have a big impact on inventory management in the future because it is able to create products on demand. Today, companies tend to make big last-time buys of spare parts and storing them in stocking locations before the manufacturer stops making them. With 3D printing companies won’t have to guess the number of parts they need to buy but will print them as needed. This will bring about millions in inventory savings.
We have already started doing this with a partner called Cloud DDM at our supply-chain campus in Louisville. We’ll be expanding this to other campuses around the world. The customer uploads the part design, the part is printed, and is sent out the same day for overnight delivery.