According to SYSPRO, a global provider of industry-built ERP software, disruptions in the dynamic business landscape are impacting supply chain management and inventory outcomes.
As the Australian manufacturing sector navigates mounting pressure from global markets, SYSPRO affirms that the need to be responsive to supply chain demands has never been more critical. In these unpredictable times, manufacturers and distributors recognise the indispensable value of efficient inventory management as a vital lesson learned from recent supply chain disruptions.
According to KPMG’s Insights into the Supply Chain Trends Shaking Up 2023, 67% of organisations recognise that meeting customer expectations for speedy delivery will be a critical factor shaping the structure and flow of supply chains in the coming 12-18 months.
The KPMG Insights also state that although it may seem easier to get goods to consumers in 2023 compared to the earlier days of the COVID-19 pandemic, the process remains far from simple.
Costs continue to be a challenge due to the intricate manufacturing processes and the increased demands of consumers. To address these complexities, SYSPRO suggests businesses re-evaluate their supply chain strategies, reassess their inventory distribution networks and adopt a unified commerce approach to create a seamless customer experience.
According to James Robinson, VP of Services at SYSPRO APAC, there are ways to navigate supply chain disruptions with the help of Enterprise Resource Planning (ERP) systems. Still, it requires a shift in business practices.
“Historically, just-in-time (JIT) inventory and lean operations were implemented to enhance profitability. However, these models have inadvertently led to inventory shortages during disruptions,” says Robinson.
“To ensure long-term resilience, manufacturers must adopt a new operating model centred around Risk, Transparency, and Resilience.”
To effectively manage inventory risk, SYSPRO says companies need to recognise the essential components and materials required for uninterrupted production. They also need to ensure that these critical components can be sourced from multiple suppliers to mitigate the impact of supplier disruptions.
Applying the Theory of Constraints (TOC), a recognised process improvement methodology can help analyse the supply chain. Introducing buffers at various supply chain stages, such as in-transit inventory, factory floor stock, and safety stock, may also minimise the financial impact of supply chain disruptions.
Robinson continues, saying running stress tests, enabled by ERP systems, allows organisations to simulate various scenarios and understand potential impacts on cash flow and profitability. These tests identify critical suppliers, alternative sourcing options, necessary buffer stock levels, and the ability to redirect production quickly.
To enhance inventory transparency, SYSPRO says companies must extend their focus beyond Tier 1 suppliers to gain insights into potential risks from second-tier suppliers. Collaborating with suppliers through implementing a portal allows suppliers to access real-time stock levels and movements, enabling them to plan their operations accordingly.
By identifying critical components and diversifying suppliers, companies can also enhance the resilience of their supply chain. Resilience is emphasised to mitigate the cumulative knock-on effects of prolonged disruptions, which can severely impact inventory levels and overall operations.
SYSPRO highlights how managing inventory amid disruptions is crucial for sustaining business operations and maintaining customer satisfaction. Manufacturers may confidently navigate disruptions by adopting ERP solutions and implementing a new supply chain operating model based on Risk, Transparency, and Resilience.