As business management software applications become more advanced, companies are placing a greater reliance on automated processes and data to support Supply Chain Management functions including inventory management, warehousing and procurement activities in an effort to make their businesses more efficient and improve profitability.
Improved access to meaningful data through intuitive reporting tools also has the potential to provide new insights into company performance and assist in the identification of areas for improvement. Given this, why is it that many businesses don’t realise the full benefit, including process efficiency and improved financial performance, of implementing such systems?
Assuming the system implementation was done properly, and that users are consistently applying the processes and tools as intended, the answer is most probably found in the quality of the data that the systems and processes rely upon.
Data integrity or accuracy is a fundamental assumption on which the benefits of these software applications are based. They perform calculations based on programmed logic, they don’t question the accuracy of the data which is provided and subject to complying with any pre-defined validation rules, simply perform programmed calculations to generate outputs or perform pre-programmed actions based on the information that has been provided.
Effective Supply Chain Management relies on accurate and relevant data including but not limited to; Stock on Hand, Storage Location, Min/Max, Safety Stock, Re-Order Points, Re-Order Quantities, Supplier Lead Times, Standard Costs, Bill of Materials, Part Numbers, Drawing Revision, etc. Some examples of how poor data integrity can impact not only supply chain processes, but ultimately the overall operational and financial performance of the business, include;
Inventory Management - ERP systems and MRP functionality can automate the process of inventory replenishment but inaccurate data can result in incorrect inventory investment decisions, reduced stock availability, production bottlenecks, scheduling issues, poor customer delivery performance, reduced customer service levels, increased inventory levels and obsolescence exposure to name a few.
Warehouse Management - Inaccurate stock on hand and storage location data impacts the company’s available to promise performance for customer orders as well as creating warehouse inefficiencies as warehouse staff spend unnecessary time trying to find inventory that is either not stored in the correct location or is not physically in stock at all.
Strategic Procurement – Procurement related data not only helps companies understand where they spend valuable company funds, it also plays a major role in ongoing supplier management, the effectiveness of strategic procurement activities and negotiation with suppliers. Negotiations with suppliers are most effective when the business has reliable historical spend data with which to develop targeted negotiation strategies. Potential savings may be left on the table if procurement staff do not fully understand their current spend or supplier performance as part of negotiating new prices and supplier agreement terms.
As part of any system implementation, a key activity should be a focused effort around data integrity. Identify the data which the system needs to operate effectively, document standards for data storage and maintenance and cleanse the existing data before it is uploaded into the new system. Similarly, businesses that have issues with data integrity in their existing systems should take a structured approach to reviewing and cleansing the affected data. Once the initial data cleansing is complete, a diligent and consistent application of standardised processes and controls is required to ensure that data integrity is maintained.
If you think your data could be hindering your Supply Chain performance, contact Procuremax to see how we can help.