• Cognizant 20-20 Insights
Synchronizing Order and Inventory Management for Competitive Differentiation and Growth Introduction
Order and inventory management have always been the center of supply chain management. To remain globally competitive, organizations must effectively manage the inventory of a network of distribution systems, in harmony with order management. The business process lines in the supply chain are optimized by various software packages available in today’s market. This paper presents a model organization’s order and inventory management system. The manufacturer operates its own plants, while sourcing from vendors for specialized products. It operates its own logistics and transportation system for distribution and retails its product lines through its own captive stores. availability at the store. An inventory shortage allows store associates to source from a regional distribution center (RDC), the plant, the store or another vendor. Supply Management Supply is the future inventory, as well as the physical inventory available in the store. The supply in a store is managed in the following ways:
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Replenishment orders Inventory adjustments Blind receiving Returned orders
Inventory management is at the core of the entire supply chain. It begins with the demand forecast, based on historical and market trends data. Optimal inventory management requires a fine balance between the two prime competing factors of customer satisfaction and cost. Figure 1 presents the inventory management process flow, from forecast through fulfillment. Demand Management When a store receives an order, it reserves inventory for that order, based on inventory
Replenishment orders: The inventory at the store can be replenished through a transfer order or purchase order. This could be a manual process or a system-generated one. These orders are placed by forecasting the demand for a product. They are designed to even out the fluctuations in supply and demand, while meeting customer needs. Inventory adjustments: Store associates can adjust inventory in the system by providing the reason for the adjustment. These adjustments provide the ability to handle situations such as damaged inventory, synchronizing system inventory with the store’s physically available inventory and manual ship errors.
cognizant 20-20 insights | july 2011
Inventory Management Process Flow
Forecast generation based on historical, seasonal and market data.
Production Planning Manufacturing Plant
Inventory Management 1. Counts - Cycle counts - Physical counts 2. Inventory Audits 3. Monitors
Demand created by sales orders
Pick now Supply out
Regional Distribution Centers Vendor Inventory Adjustments
Supply in – return orders
Blind receiving: When goods are received that are not tagged to a specific scheduled store order, the inventory of those goods is adjusted in the store. Return orders: Customers can return the products back to a sales service center. These returns are obtained either with or without authorization (sales receipts), and product inventory is adjusted in the sales service center. Counts Customers may request orders in quantities that differ from the packaged unit of measure. When packages are opened, this introduces a human factor into the inventory count, which requires manual count systems to execute in a planned or ad hoc manner to maintain accuracy in the system. There are two types of counts that are maintained:
Cycle count: This is an ad hoc count process that can be requested by the inventory control department, or it can be initiated by the system. During this process, users perform counts manually for an item. In the event that a discrepancy exists between the system inventory level and the amount returned in the count, the store manager may decide to correct the count in the...
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