Watch this 30 minute webinar about how you can apply AI (Artificial Intelligence) in your own company. We provide you with insights, advice and the audience contributes with great questions.
Please contact Optilon’s Application Board Director Anders Remnebäck on +46 709 379 282 or anders.remneback@optilon.se.
Effective inventory management is one of the single biggest actions a company can take to maximize its competitiveness. It simply ensures that resources are being used smartly. In this blog post, we will look into how you can utilize AI to improve your Supply Chain inventory performance by optimizing your assortment.
Effective inventory management is one of the single biggest actions a company can take to maximize its competitiveness. It simply ensures that resources are being used smartly. That being said, a new report published by Optilon shows that many companies have a blind spot when it comes to inventory management. 22 percent of the inventory is redundant for a Swedish average company. This could be the case for many companies in the Nordics.
It’s not just about having fewer goods in stock. By always having the right mix of goods, missed sales are greatly reduced, while taking up less storage space and reducing the risk of an item being outdated. Having the right mix assures smart use of resources, but what is the effect of also understanding how you should manage your assortment? In this blog text we will look into how you can utilize AI to manage the product portfolio and increase your sales
Why is the right assortment important?
Effective inventory management can have a major impact on a company’s profitability. The findings in the report mean, that these companies have more goods in stock than they need. A product less in the warehouse does not only mean less tied-up capital, but also less warehouse space, reduced distribution, and administration costs and obsolescence (when a product becomes outdated).
Inventory optimization is not just about having fewer goods in stock. By always having the right mix of goods, missed sales are greatly reduced, while taking up less storage space and reducing the risk of an item being outdated. It provides an efficient recoil for the companies. They reduce costs while increasing revenue and freeing up capital.
Companies should reduce the inventory in specific categories of products, removing some SKUs, and minimizing the loss of revenues. They need to optimize the assortment without losing customers, taking into account, that customers may switch (together with all their purchases) to competitors if one of their favorite items is removed and it is not replaceable by any other.
The Traditional Inventory Approach
The Traditional Inventory Approach often entails removing SKUs that perform worst from the inventory, or in other words, remove products from categories that sell the least. Using this approach, it is possible that some clients are specifically interested in these SKUs, so that if they are discarded, customers are lost completely with all the revenues they bring.
A new algorithmic Approach
In contrast to the traditional approach, you can focus on removing SKUs which are indifferent to the consumer. With AI technology you have the possibility to predict if, from the consumer’s point of view, the removed SKU is replaceable by another item and we find the right match in term of profitability. In order to achieve this, our models, using only transactional data, answers the following inventory questions:
Optimization Results
Our algorithmic approach has been tested side-by-side with the traditional method of removing least sold products and the algorithmic approach achieved 88% less estimated sales loss in the set of identified items for removal.
Are you looking for more information about AI and how you can incorporate it into your own Supply Chain – then you can download some of our great content via the below link.
Blockchain is not a way station on the road to increased digitalization. It is a paradigm shift in how businesses, customers and partners interact and exchange value. Those who wait until the later phases will be shut out of opportunities to learn, earn value and influence blockchain´s development in the value chain. Blockchain is potentially a disruption of how Supply Chain of the future operates.
Digital advances have enabled businesses to streamline an increase in interactions between customers and value chain partners. Many companies have information-heavy processes that still require multiple entities to exchange private documents. The technologies to do so are un-secure, error-prone and fraud-ridden.
This post will investigate what blockchain is all about and how it can make a difference in the Supply Chain.
What is Supply Chain Blockchain?
For generations, businesses have relied on centralized infrastructures, such as payment systems, insurance, delivery and logistics services, and governments – to execute commercial transactions and manage risk. But these systems were not designed to handle the kinds of machine-to-machine transactions made possible by digital platforms.
Blockchains create decentralized, distributed and digital records of transactions that are anonymous, tamper-proof and unchangeable. This technology establishes trust among unfamiliar or unknown partners by ensuring that every successful transaction is recorded and stored in multiple locations across the entire distributed network.
Complex mechanisms are put in place to validate the accuracy and integrity of transactional information. Finally, in theory, there is no intermediary, although this is not always the case. This greatly eliminates the opportunity for criminal interventions or invalidated transactions.
Blockchain is not a database. Blockchain enables trusted interactions between unknown participants.
How can Blockchain in Supply Chain build the business case?
There are 6 ways that blockchain can support building the business case.
Getting the journey started
Many organizations have not yet focused enough on the type of supply chain decisions or processes that blockchain might enhance.
There is significant experimentation with blockchain across every industry around the world. Corporations that have long relied on centralized systems for control and security are being pushed to accept the concept of decentralization and distributed control that is central to blockchain.
Our advice to you: Experiment, focus on a short term tactical, narrow-scope, deployment. Do that by building a solid proof of concept.
Questions which can help you unlock the business value of Blockchain in Supply Chain:
Alis Sindbjerg Hemmingsen is a Thought Leader at Optilon. She has more than 25 years of experience within the Supply Chain field. Optilon has a long track record helping companies achieve competitive advantages by improving Supply Chain performance. Learn more about Optilon here.
Please contact Optilon’s Application Board Director Anders Remnebäck on +46 709 379 282 or anders.remneback@optilon.se.
Every fifth item in stock could be unnecessary at a Swedish average company. This is shown in a new report from Optilon. For Sweden’s 100 largest companies this has an impact of SEK 93 billion / EUR 8.7 billion – that could be invested in more growth promoting activities. The most unnecessary industry vertical is tech and life sciences, and the least unnecessary is industrial and natural resources.
Effective inventory management can have a major impact on a company’s profitability. A new report shows that the impact can be greater than previously anticipated. The Report of Unnecessities, which has studied Sweden’s 100 largest companies, shows that 22 percent of the inventory is redundant for a Swedish average company. This means that they have more goods in stock than they need. A product less in the warehouse does not only mean less tied up capital, but also less warehouse space, reduced distribution, and administration costs and obsolescence (when a product becomes outdated). By eliminating the unnecessary inventory with efficient inventory management, an average company among Sweden’s 100 largest companies could have acquired about SEK 1.2 billion.
– This shows what a blind spot inventory management is for Swedish companies today. It’s not just about having fewer goods in stock. By always having the right mix of goods, missed sales are greatly reduced, while taking up less storage space and reducing the risk of an item being outdated. It provides an efficiency recoil for the companies. They reduce costs while increasing revenue and freeing up capital, says Anders Remnebäck, Supply Chain-expert at Optilon.
That a fifth of the inventory is unnecessary for Sweden’s 100 largest companies equals to an area, which is as large as 586 soccer fields or 151 IKEA warehouses – which is more than 50% of all IKEA Group’s stores. The report shows that with a more efficient inventory management, these companies could together have freed up SEK 93 billion / EUR 8.7 billion. A sum that could have been invested in areas that increase competitiveness and growth. This could be used to pay off loans, invest in R&D or hire more people. The sum equals to about 154,000 job opportunities, which is more than what Apple has employees.
– Effective inventory management is one of the single biggest actions a company can take to maximize its competitiveness. It simply ensures that resources are being used smartly, says Anders Remnebäck.
Most unnecessary stock is tied up in the tech and life science industry vertical. Companies in this industry could, with more efficient inventory management, be able to reduce their inventory by 33 percent, and the number of days a product is on the shelf with 21 days on average. From 63 to 42 days. The most effective industry vertical today is industry and natural resources, where more effective inventory management could free up working capital by 15 percent.
Would you like to know how much unnecessities you have in your company?
All industries are becoming more and more technology-driven. We are always looking for new technologies to solve old frustrating problems, or to give us a competitive edge in fast-moving business environments.
It has been predicted for a few years now that the Supply Chain will be a great place to introduce blockchain technology. It is because of the blockchain’s inherent characteristics such as transparency, immutable records, resilience against attacks, etc.
When starting a blockchain project, it is for obvious reasons easy to focus on the blockchain technology itself. However, in this post, I will point out one area that is of specific interest when implementing a blockchain project. It has little to do with the technology and more to do with new challenges regarding business structures, business relationships and related interfacing technologies that arise because of the nature of blockchain technology.
Onboarding and offboarding in the blockchain is important
The first challenge to look at is the onboarding/offboarding process to/from the blockchain. Imagine a complex supply chain with tier 3, tier 2 and tier 1 suppliers and several manufacturers. These relationships are not static. They can be quite dynamic.
Let’s say a number of these actors agreed to use a blockchain to track their interactions and the flow of goods from one to the other. It would be necessary for the parties to agree on how you would join and onboard the blockchain, as well as offboard.
For the blockchain to function in a way, that serves the purpose of tracking the provenance of the goods that flow through the blockchain, the on/offboarding process needs to ensure that only qualified suppliers can join. If any dodgy counterfeit supplier could join, the blockchain would not be able to serve its purpose. It could not provide the supply chain with integrity ensuring the provenance of the items flowing through the supply chain.
The challenge is similar to the “Know Your Customer” (KYC) regulation in the banking sector. Banks must ensure that they have thoroughly verified the identity of a new customer before opening a bank account. The regulation makes it harder for criminals to launder money or commit tax fraud.
Define the roles in the blockchain from the beginning
Who in the supply chain should have the role of enforcing the on/offboarding of suppliers? And take on the cost of that administration? If the question is answered from a business perspective, it is a great start. A dominant player in the supply chain, e.g. a huge manufacturer, may enforce the policy by stating – “if you want us to buy your products you must join the blockchain, and this is the process”!
In heavily regulated industries there might already be suitable actors/regulators who can stipulate the rules and take on the verification and administration. It should also be in their interest. In many business domains, there are already purchasing portals that essentially provides the services of vendor auditing and verification. Regardless of the solution, it is a process and solution that must be defined and implemented when using blockchain for supply chain integrity and visibility.
Mikael Ahlström has spent over 25 years in the technology space. His experience ranges from industries such as telecom, utilities, supply chain and finance. During the last years there has been an intensified focus working on technologies for tracking and tracing of provenance using technologies such as blockchain for purposes such as anti-counterfeiting, supply chain visibility/integrity and optimization. Learn more about Mikael Ahlström here.
Anti-counterfeiting through Supply Chain blockchain
How to unlock business value through blockchain in supply chain
Please contact Optilon’s Application Board Director Anders Remnebäck on +46 709 379 282 or anders.remneback@optilon.se.
Counterfeiting is a challenge many brands encounter. Digital advances have enabled businesses to streamline loads of interactions between customers and value chain partners. Many companies have information-heavy processes, which still require multiple entities to exchange private documents. The technologies to do so are unsecure, error prone and fraud ridden.
Counterfeiting is a dilemma for many brands
Many large brands have a need to protect their products from counterfeiting. At the same time, they desire a direct customer relationship instead of having one via the retailer or the ecommerce site.
Retailers are trying to find ways to provide an in-store experience that gets the consumer out of the couch, but not necessarily off-line. High fashion, luxury goods, and quality toys are still bought in the store. We want to touch, feel, try on, test and experience the premium goods before we decide to buy, and we want it to be a great experience.
However, these products can very often be found on ecommerce sites at a discounted price – but can the site and the product be trusted? Do they sell authentic items?
Blockchain can help brands build trust
Premium goods have a high secondhand value and are therefore also sold over the internet. How can a buyer be sure that they are not buying a counterfeit product? High value brands have an excellent opportunity to use blockchain to protect their goods from counterfeiting while building a direct relationship with their fans. Customers buying these products very often want to be recognized and associated with the brands.
Use already existing technologies
Using an already existing technology, such as a unique identifier, could be a way forward. It can be placed as part of the product or packaging and can be scanned as the last step of the manufacturing process. The identifier will be registered in the blockchain so that the product can be identified at any point in the consumer space, the secondhand market and for many other use cases. This could of course be achieved by a secure database. But using a blockchain solution, allows the brand owner to gradually integrate their production line and supply chain upstream, over time adding a higher degree of integrity and visibility to their supply chain.
Unique identifiers such as QR codes and NFC chips would allow the consumer to validate the items authenticity using a regular smart phone and at the same time opt in to be registered as the owner of the product. The brand owner would have the choice to provide product information, receipts, warranties and service records via the blockchain.
Knowledge about the consumer
At the same time a very real “link” is established directly from the brand to the consumer. When the item is sold second hand the seller can transfer the ownership to the new owner, who then gets access to remaining warranty, service record history etc.
The value of the blockchain will be the possibility to follow an item as it changes custody from manufacturer to purchaser. This value will increase more and more with increased counterfeiting (which is increasing at an ever-faster pace).
We demand secure products, and products that can demonstrate that they have been manufactured in an environmentally responsible manner. As the millennials are getting more and more purchasing power, and influence the value of solutions, securing the integrity of the supply chain will grow immensely and blockchain fits into that category of solutions.
Mikael Ahlström has spent over 25 years in the technology space. His experience ranges from industries such as telecom, utilities, supply chain and finance. During the last years there has been an intensified focus working on technologies for tracking and tracing of provenance using technologies such as blockchain for purposes such as anti-counterfeiting, supply chain visibility/integrity and optimization. Learn more about Mikael Ahlström here.
Blockchains, however, create decentralized, distributed and digital records of transactions that are anonymous, tamper-proof and unchangeable. This technology establishes trust among unfamiliar or unknown partners by ensuring that every successful transaction is recorded and stored in multiple locations across the entire distributed network.
The challenge is, however, how to unlock business value. This post will cover how it can be done from a counterfeiting perspective.
Onboarding and offboarding blockchain in supply chain
How to unlock business value through blockchain in supply chain
Please contact Optilon’s Application Board Director Anders Remnebäck on +46 709 379 282 or anders.remneback@optilon.se.
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