Analyzing the effects of Supply chain visibility IT applications on Inventory levels and cycle-time
Industry Vertical and the Company:
An automobile components manufacturer of International repute.
76 global plants had wide-variance in inventory (measured in no-of-days) while they supplied to same automobile manufacturers on almost similar terms. The only difference being the IT applications deployed in each of the plants. The Management wanted to understand whether there wasany correlation between IT investments and Inventory turnover.
The global inventory was about US$ 220 million and Inventory ranged between seven to 88 days in different plants.
A model was developed to accord an “IT Maturity Score” for each of the plants – based on IT-Applications-Portfolio, Automation of the Process Chain, Enterprise Application Integration, Batch Processes and typical Lag in Information currency, and finally availability of Automated Supply Chain Visibility Analytics-Reports and Automated Early-Warning-Systems & Alerts.
Data was gathered from Global locations through a web-based survey – combined with interviews & focus group discussion at the Head Office, and analyzed.
The analysis was a heuristic process that involved comparison of Weighted-Average-Score of each plant for IT applications maturity and accurate Supply Chain visibility for both Forward Supply Chain and Backward Supply Chain –with inventory,
The Coefficient of Correlation was found to be -0.73 on overall data, and if we excluded the outliers (which were driven by other extraneous reasons), it was close to -0.9
A Supply Chain visibility IT Application was recommended, along with implementing Centralized MDM and Data-Governance model.
The results were visible in six months, and within three years the global average inventory had come down from 44 days to 14 days.