Inventory Visibility: What It Is and Why it Matters
For an order fulfillment operation to be truly effective and successful, you must have a clear and accurate understanding of your inventory. What product do you have on hand (quantity by SKU)? Where is it located along your supply chain? Is this information accurately reflected in your systems?
If you can’t answer these questions, then there are likely inefficiencies hard-baked into your operation that are significantly hampering your ability to do business effectively.
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Stockouts, overstocks, unaccounted-for shrink—these are all problems that warehouses and DCs need to stay on top of if they are going to be profitable. That’s where the idea of inventory visibility comes into play.
What is Inventory Visibility?
Inventory visibility simply means knowing what inventory you have on hand, and where that inventory is located, at any given moment.
While inventory visibility has always been a critical part of any retail operation, it has become increasingly important as many operations have shifted to an omni-channel order fulfillment and distribution model.
Today’s order fulfillment operations may have inventory located in countless spots along the supply chain—in the warehouse or DC, on trucks in transit, on the store shelves or in the backroom, etc.—and ensuring that all of that inventory is appropriately accounted for and reflected in the stock ledger is critical to running a successful operation.
In short, inventory visibility aims to ensure that internal records of inventory reflect reality. This allows for more accurate information as it relates to stock, order monitoring and tracking, and more.
Benefits of Inventory Visibility Along the Supply Chain
Today’s order fulfillment and material handling operations stand to gain a lot by implementing a more accurate system of inventory visibility along their supply chain. Below are just some of the most powerful benefits that inventory visibility brings.
1. More Efficient Use of Time
Manually tracking inventory is a time-consuming and tedious process—one that ultimately can cost a lot of money. This is especially true of operations that work within a complex supply chain where product is regularly shipped between multiple warehouses, distribution centers, and stores. Manually tracking this inventory from node to node along the supply chain can add up to a lot of wasted man hours, which is one reason that many retail operations don’t do it nearly enough.
With advances in technology like RFID and barcode scanners, inventory tracking can be much more automated than in the past, allowing for a more efficient use of time and capital.
2. Improved Predictability
To be successful in order fulfillment over the long term, an operation needs to get good at predicting its inventory needs. How much of each product is typically needed over the course of a typical business cycle? When do you experience peak demand? Does your operation experience any seasonality?
By ensuring accurate inventory visibility, an operation can constantly reconcile current inventory levels against expected demands, allowing for smarter replenishment and fewer stockouts. Without a clear sense of the inventory your operation has on hand, it is much too easy to end up ordering too much or too little product, impairing your ability to fulfill orders.
3. Increased Security and Quality Control
While inventory visibility is primarily concerned with determining how much inventory is located at each step along the supply chain, it brings with it an added benefit important to highly-regulated industries: The ability to track specific product/orders from point to point.
Operations involved in the production and transportation of goods in the industries of bio-medical supplies, pharmaceuticals, food, and chemicals, for example, generally must keep closer tabs on exactly what product (in terms of lots or batches) is delivered where.
Having accurate information in this regard is crucial for successfully heading off recalls, especially in industries where consumer health may be impacted. Accurate inventory visibility and tracking throughout the supply chain makes it easier to head off put these issues to bed before they spiral out of control.
4. Smarter Allocation of Resources
When it comes to a business’s balance sheet, inventory is likely to be one of its largest line item assets/expenses. Each piece of inventory reflects a certain amount of money that is tied up in physical form on the shelves of your store, DC, etc.
When each unit represents a dollar amount, it becomes clear that your goal should be to get your inventory to the lowest possible levels that they can be while allowing you to meet the demands of your customers. Doing so frees up capital that would otherwise be locked up as items on your shelves: Capital that you can likely put to better use growing and expanding your business.
Improving your inventory visibility means creating a more accurate picture of your current inventory levels. This data, paired with other data about your typical orders and demands, allows an operation to make smarter decisions when it comes to replenishment.
How to Improve Inventory Visibility in Order Fulfillment Operations
Every order fulfillment operation is unique, with its own unique business challenges, demand cycles, and distribution channels. Because of this, it is difficult to prescribe a single solution that will make sense for all businesses.
That being said, improving your operation’s inventory visibility will likely boil down to a combination of some number of technologies, likely including RFID or barcode scanners, a warehouse execution software, and other automation technologies. By working with a qualified systems integrator, operations can ensure that they receive a custom solution to the problem of improving inventory visibility at all junctures of their supply chain.