Question 1

Read the article below and answer the questions that follow.

Supply Chain Inventory Visibility

According to the GEODIS Supply Chain Worldwide Survey, 62% of supply chain operators have limited visibility of their supply chain, 15% only have visibility on production, and only 6% report full visibility. Warehouse management systems can be plagued with inconsistencies and inaccuracies, which often snowball into costly miscalculations, bumps in managing orders, and overall poor inventory visibility and stock management. Factors like varying warehouse locations, different management systems, and timely report generation create challenges for inventory optimization in all corners of the supply chain. In fact, 43% of small businesses are either not tracking inventory or using manual processes, such as spreadsheets or pen[1]and-paper. This creates a higher probability of creating double entries, difficulties in placing and receiving orders, and time-consuming processes of locating stock, among other errors.

With 72% of retailers planning to reinvent their supply chain with real-time visibility enabled by automation, sensors, and analytics, businesses who have implemented digital transformation strategies in their supply chain operation are experiencing significant benefits. Here's how you can transform your inventory management process to be proactive, not reactive.

1. Intensified Focus on Inventory Levels

A critical component of Artificial Intelligence (AI) in the inventory optimization processes is its ability to deliver instant alerts on low inventory, delay in delivery, and incidents as they occur. These automated inventory alerts play a huge role in improving the speed of order shipments and increasing the efficiency of business operations. Other benefits include reduced stock waste, improved collaboration, and visibility of stock information across departments, monitorization of pricing trends and price increases, inventory turnover, velocity, and more.

2. Slash Costs

As of June 2019, U.S. retailers are sitting on approximately $1.36 of inventory for every $1 in sales. In fear of being out of stock when a customer orders it, retailers, or overstocking inventory, resulting in even more costs to keep and manage the extra stock. On the flip slide, 34% of businesses ship late because they sell products that are not actually in stock. By reducing stock-outs and overstocks, retailers could lower their overall inventory costs by a minimum of 10 percent. In addition to increased visibility and accuracy of inventory management, AI has the ability to analyze the performance of suppliers, products, and employees which adds to potential cost savings. By proactively identifying underperforming areas of the supply chain, including unsold products, retailers can easily analyze supply chain performance for improved decision making and tighter operation.

3. Keeping Customers Top of Mind

30% of supply chain leaders highlighted the need to respond to customer mandates for faster, more accurate, and unique fulfillment as a top business priority moving forward. The same study found 28% of those surveyed see the ability to blend data from multiple systems for complete supply chain visibility as a key benefit of an advanced analytics initiative. This builds on the initiative to access data whenever and wherever you need it with the ability to derive insights as quickly as possible. Not only are supply chain leaders wanting to stay connected and transparent with customers, but the customer experience is now dependent on the supply chain's relationship and processes to access information from Big Data - another factor that AI streamlines with automation and speed.

In the context of the case study, critically discuss the cost of inventory and explain how an organisation can transform its inventory management process to be proactive. Use relevant examples to justify your discussion.