Global Trade: How can third-party logistics providers help manufacturers with inventory management?

Alan Alming: 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, 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 logisitics 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.

What are the advantages to manufacturers to using a 3PL for inventory management?

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 area is the technology to manage day-to-day inventory planning and rebalancing.

What kinds of technologies are put to use to manage these processes?

There are three main types of technology. The first is network planning technology that develops the best network based on tradeoffs of inventory and transpostation costs.
Once the product reaches the warehouse, the warehouse management system (WMS) 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 levels.
Inventory planning technology applies sophisticated algorithms to analyze customer order data to determine how much inventory to maintain at which stock locations.

Can you give an example of UPS clients that have been helped with inventory management?

Carestream Health is 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. Carestream 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. UPS also manages that network on their behalf.

What have been some of the most recent trends in this area?

3D printing will have a big impact on inventory management in the future because it is able to create products on demand. Today, companies make big last-time buys of spare parts 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. The customer uploads the part design, the part is printed and sent out the same day for overnight delivery.