Analyst Insight: Many supply chains experience inefficiencies in receiving materials, and the construction sector is no exception. By optimizing demand forecasting, inventory management, and the setting of order cycles and quantities, and by increasing the level of automation in routine areas of replenishment, teams can focus their expertise on areas that require closer attention.
Many ready-mix concrete operations rely on paper receipts for inventory management. The process involves a plant operator collecting a paper ticket from every material delivery driver, then taking the pertinent data from the ticket (material, tonnage, truck info, purchase order number, etc.) and typing this data into a batch system. A typical ready-mix plant can receive five cement loads and 20 aggregate (sand and rock) loads every day, while a busy plant can easily receive double to triple that amount. That’s 25 to 75-plus paper tickets per day that the plant operator is handling, while simultaneously performing the critical duties of running the plant.
Data is often pulled from multiple systems in a network of plants and used for global inventory management. Many operations depend on this information for both real-time inventory updates and monthly, quarterly and annual reconciliation. This can be a big problem, because time-consuming, paper-based processes leave operations at risk for errors that can cost operations well into six figures per year.
Batch operators usually spend 60-90 minutes or more at the end of the day, every day, entering material receipts, but there are so many other aspects of the operation that could be focused on if it were possible to eliminate the time it takes to complete this task. This non-productive effort not only adds to labor costs and increases overtime, but also takes operators away from their core function.
Often this is the only way to account for inventory, so many companies just throw the extra expense into “the cost of doing business” bucket. The information is labor intensive, untimely (you have no real time visibility if you’re waiting until the end of the day) and inaccurate. Inventory levels could be completely thrown off, and operations wouldn’t have a clue until it’s too late, sometimes months later.
Say you’re on a road trip and realize your gas gauge is broken. Would you continue on the road without knowing if your tank has the right amount of gas? Probably not. However, many ready-mix operations are cruising along without a “gas gauge” to automatically update inventory information. The data and visibility that are needed to make important production decisions just isn’t possible through a paper ticket format, which is why many companies in the industry today are beginning to realize the value of an automated replenishment system.
Such a system never stops working. It constantly monitors stock, sales, and demand. Human errors, such as mistyping data or over-ordering, are eliminated. A good replenishment system can also factor in forecast changes in demand and give you real time feedback.
Ticketing data can now be automatically pushed from the ticketing system to the batching system, and inventories are updated in real-time during production. Inventory projections become much more reliable by depending on actual usage projections, based on ready-mix concrete orders. The power of automated replenishment increases service levels, leads to increased sales, and improves customer satisfaction.
Outlook:
We’ll see more companies adopt innovations of this type as the industry continues to realize the importance of digitization. The ability to eliminate manual processes helps to improve accuracy by automatically capturing material receipts. Doing so provides visibility into future deliveries and helps eliminate errors during reconciliation. There’s power in having instant visibility into the status of the raw-materials supply chain, allowing decisions to be made based on information that’s up to date.
Jason Campbell is Business Development Manager of Supply Chain with Command Alkon.
