Experts at McKinsey & Company predict that manual inventory and demand planning will be a thing of the past as companies replace outdated processes with automated digital systems.
In an insight piece written by several McKinsey partners, the authors show that automated planning with low or no manual intervention can dramatically reduce supply chain costs and inventories.
The shift is being initially led by companies in high tech, online retail and consumer-packaged goods (CPG) sectors.
Examples cited by McKinsey include an automated inventory planning system that uses digital technology to optimise inventory levels, allowing one company to release tens of millions in cash flow.
In other examples, a company reduced end-to-end processing time by 60 per cent after automating 95 per cent of its order-to-ship process, while a major food and drink firm used predictive analytics to double the accuracy of its weekly demand forecasts.
Although these are cutting-edge examples, the authors suggest that some activities, such as the development of short-term demand forecasts for stock-keeping units can already be done automatically with existing technology. In some cases, existing Enterprise Resource Planning (ERP) systems can be enough to automate relevant tasks.
According to the experts, the first step for manufacturers is to analyse existing inventory management, production scheduling and demand planning systems to find the simple, repeatable processes that are most amenable to digitalisation.
Once these have been identified, companies should then look to replace manual intervention in these areas with automated systems to free up human capacity.
For more information about efficient supply chain management, explore our manufacturing factsheets, which cover concepts such as inventory management, material requirements planning and capacity planning.
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