Inventory management: from RFID to the #2 pencil

There are many choices to assemble the right supply chain solution.


There are many choices to assemble the right supply chain solution.For manufacturers, effective inventory management is a key piece of supply chain efficiency and accuracy. Yet, with numerous solutions on the market, evolving technology, and increased emphasis on running “lean,” plant managers and materials handling professionals face the challenge of determining which inventory management method to implement.

From a very basic level, there are three chief methods of managing and controlling inventory. The first and most rudimentary method is manual data entry (essentially, pencil and paper), while the other two—barcodes and RFID (radio frequency identification)—involve automated data capture technologies.

But, before we dive into each of these methods, we need to take a step back. With so many new and exciting technologies on the market, it is easy to get wrapped up in a trend and say something like, “RFID is the latest and greatest way to track our inventory, so I’m going to put RFID tags on all of my products.” Force-fitting a solution just because it sounds like a viable option, or because everyone else is using it, is a detrimental idea.

Before you purchase a new infrastructure, stick on a barcode label, or sharpen a fresh box of No. 2 pencils, you often need to start at the very beginning. It is vital that you first perform an operational assessment or process review to define your business objectives and identify exactly what you are trying to achieve.

Perform an operational assessment

In performing your operational assessment, you must look at three pieces of the puzzle: process, people, and technology. Think of these pieces as a three-legged stool. All three are of equal importance to your overall operation. So, if your process is defective (for example, you have multiple touch points for outbound transactions, like separate packing and shipping stations), implementing a piece of technology will not fix it and will only reinforce the existing poor practices in your supply chain.

Also, while you are observing your processes, make sure to pinpoint any steps that are superfluous. If a process does not add value to your intended end result, remove it. Your customer only cares about receiving the order in a timely and accurate manner, so all other steps in the process are just “noise” to the customer. The steps you take should ensure proper delivery.

Next, consider your people. If you are going to end up introducing new technology to your process, like adding barcode scanning to your process for taking inventory levels, you need buy-in from not only upper management, but those who will be using the technology. Getting everyone on the same page, giving them a voice, and demonstrating why you are introducing these changes will position you for a successful implementation.

Once you have an understanding of your problem and your business goals, you can begin to look at the technology to support your efforts.

Pencil and paper

Despite the breadth of technology available today, some manufacturers still manually manage their inventory with pencil and paper, and then input data into Excel spreadsheets. Manual systems are typically used by organizations that have a smaller footprint.

These manufacturers have smaller facilities (perhaps a single parts room), fewer SKUs, and lower IT budgets, so manual data entry is sufficient. Of course, manual methods open up a greater possibility for human error, and backend data entry can be extremely time consuming and tedious. There is no way of knowing how much inventory is on hand at any given time, where it is, and whether you are picking the right item. There is little to no visibility into inventory levels and materials’ movement, placing greater pressure on employees to operate as accurately and efficiently as possible.

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