Go Digital to Revitalize your Materials Management

Srinivas Narasimhan

In a majority of industries, materials are a significant part of the cost of operations and managing them well may make all the difference between making profits and raking up losses. Materials Management gains substantially from the deployment of Digital Technologies and you should consider using them to revitalize your operations. In this blog post we will examine what changes are possible when employing Digital Technologies and what benefits they bring in. While Materials Management covers both Supply Chain and Inventory functions, most companies do not have sufficient influence over the Supply Chain they are part of. Hence this blog will greater emphasis in transforming your Inventory Management, touching upon aspects of improving your Supply Chain. A detailed look at how Digital Technologies are transforming Supply Chain operations will be the subject matter of a future blog post.

Materials Planning

Digitizing your Materials Planning will yield handsome dividends. It starts with creating a rich materials knowledgebase centred on the Bill of Materials of your core manufacturing / production activity. The BoM Knowledgebase diligently records all pieces of knowledge regarding each item in your BoM, including their inter-relationships on multiple aspects including functionality, quality, performance, safety, criticality to production line, etc. This knowledgebase drives the optimizations wrought in by other modules as described in the following sections. Aided by this knowledgebase, materials are not just tracked as individual parts, but as part of a sub-assembly and assembly scheduled for a future production date, which helps the system understand the impact of delays, defects and so on involving the component on future production plans in exquisite detail. This helps us predict, modify and optimise future outcomes on a real-time based on current outcomes.

Materials Classification

While almost everyone in the Inventory Management function is familiar with ABC Analysis used to classify and efficiently manage inventory. It is well known that the numbers generated by the conventional ABC Analysis are approximate. Since inventory planning warehousing strategies rely on ABC analysis to make key logistic decisions, the industry and the scientific community have been working on more accurate classification systems. Several methods have been proposed using the Artificial Intelligence and Machine Learning technology. While traditional analysis used to focus on Annual Dollar Usage (Unit Cost times Annual Volume), the newer classification techniques use multiple criteria such as average unit cost, critical factor and lead time. The material classification system derived using multi-criteria classification techniques have been shown to produce more accurate classification of the inventory.

Material Procurement

Material Planning and Classification can be considered background tasks that create knowledge, establish policies and procedures and provide insights to assist other operations. Material Procurement is a foreground activity that kick-starts your entire production cycle. There are several ways in which Digital Technologies help streamline this operation. It often starts with digitizing your procurement records (supplier quotes, purchase orders, material transport way bills, goods inward receipts, payment advices, etc.) for the previous couple of years. If you only keep paper records, this could still be done quickly and automatically by scanning the paper records using OCR technology. The digitization of this data helps analyse your consumption and procurement trends,  supplying trends of each of your suppliers, the actual outcomes vis-à-vis planned outcomes of your procurement actions.  This information is combined with the Material Classification system to determine optimum ordering policies for different items in the Bill of Materials under different circumstances. These policies are then combined with Material Planning knowledgebase to initiate procurement actions that result in the most minimum cost, minimum delays and highest quality. These activities are often supplemented by RFID tagging of materials to dynamically track them from point of shipment to your stores, using RFID antennae installed at strategic locations. You can read about how RFID tagging is revolutionizing the Supply Chains all over the world here. IIOT devices are further helping your store to keep a physical tally of items, to reconcile with records and alert when discrepancies are noted. Furthermore, your store can automatically sense consumption, and initiate procurement action as per the ordering policy using appropriate workflow stages as per your company policy. The system can identify good and poor suppliers based on multiple criteria based on their performances, modify order quantities and schedules to compensate for each individual supplier’s anticipated delivery quality lapses and lead time slippages!

Material Storage & Handling

To begin with, the Digital Technologies can help you identify the optimal size of inventory, storage location and space for your operations based on your plans. The information on sizing and space comes from the Material Planning Knowledgebase we described earlier. The optimal store locations are recommended based on the layout of your plant and material movement trajectories as per the established processes. Where required, adequate isolation and accessibility will be provided as per the material storage and handling requirements, which are captured in the knowledgebase. The recommendation on storage also take into account the ambient conditions and safety requirements for the storage of various items based on their material properties. The optimal size of the inventory is suggested based on optimal procurement policies derived from patterns of consumption and replenishment discovered in the Material Procurement optimization stage. It could also be simply based on your past history without optimization if you are just looking at Material Storage and Handling. Further, with intelligent sensors placed strategically, the ambient conditions can be continuously tracked to ensure the materials do not deteriorate or get damaged during storage. Additional sensors can also ensure safety hazards are avoided when materials requiring safe handling are stored. As planned use of the item is already determined in the planning stage, checks are provided to ensure materials are not diverted from planned usage. Missing and damaged materials are routinely detected and reported, as are any potential hazards (leaks, spillages, fumes etc.). Digital Technologies also provide you autonomous material movement capability within your store and plan area t large using mobile robots

Other Improvements

Cloud and Mobile technologies supplement the others to ensure the benefits of a digitally transformed Materials Management are available to your entire workforce anytime and anywhere. You can be notified of ordering, receiving and issuing actions of concerned store items on you mobile and enquire the availability of any item in your store and its current location in real time. Making accurate real time information available to your workforce in real time enables them to make smart decisions and enhance the productivity and profitability of your operations further.

We will talk about how Digital Technologies can reenergize other functions in your business in future blogs. Keep watching this blog for updates, or write to me if you want to ask me, or share something with me on the subject. See you until next time!

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