Inventory Management Best Practices to Help Mitigate Operational Risk for Canadian Manufacturers
As demand for higher quality products, at lower costs continues to grow, Canadian manufacturers must work harder than ever to meet these rising expectations. This means conquering operational risk by integrating demand and supply requirements and implementing inventory management best practices. This allows manufacturers to work harmoniously to help improve business performance.
What is operational risk?
Operational risk is the danger of loss resulting from:
- Inadequate operational processes
- Inadequate activities by management and employees
- Inadequate systems or external events impacting the manufacturing process
Manufacturers experience operational risk every time they implement decisions. Sources of operational risk include:
- Weaknesses in local and global supply chains
- Outdated factory equipment
- Changes in external policies and regulations
- Ignoring inventory management best practices
- Poor manufacturing safety and security
What are the dangers of doing nothing?
A failure to adequately plan for operational risk can result in a range of business issues for manufacturers that can drive up costs and hinder business growth. These issues include:
- Haphazard purchasing processes
- Poor visibility across the supply chain
- Error-prone inventory management processes
- Inability to effectively forecast demand
- Sub-optimal supplier relationships
The business benefits of tackling operation risk
Given the financial, economic and reputational risks of poor operations in manufacturing, businesses must look to integrate their supply chains and improve their inventory and operations management. Key benefits include:
- Streamlined communication and coordination: When operations are better streamlined, departments work together more effectively. Manufacturers can exchange information quickly and efficiently across supply chains to reduce lead-time, improve forecast consensus, and streamline procurement and distribution processes.
- Reduced supply chain and regulatory risk: Manufacturers can ensure complete visibility from, and across, different supply chain tiers, in order to assess and pro-actively manage risks. Streamlined processes across the organization improves decision-making abilities and provides management teams a holistic view of which risks could impact departmental actions and functions.
- Improved business performance: Improved operations make it easier to measure supply chain performance, and define and implement systems to deal with challenges in real-time. This allows manufacturers to successfully launch products and plan to meet order fulfillment quotas—in a streamlined and efficient manner.
Four steps to conquering operational risk and implementing inventory management best practices
This four-step process is aimed at aligning operational and customer-centric approaches to improve business interaction and integration.
- Define and support a robust organizational structure
Getting the organizational structure ‘right’ allows manufacturers to communicate better, fully-integrate production into the business, and improve planning and scheduling processes.
- Implement suitable process and system architectures
Building out the appropriate business processes and system architecture requirements, helps define how the organizational structure will process transactions and make decisions.
- Define sound governance models
Best practice governance models allows manufacturers to capitalize on having their best team member’s on-hand, to take on high-level operational risk management.
- Build a realistic and digestible project roadmap
Realistic project roadmaps enables manufacturers to conquer operational risk. This involves establishing controls; gathering relevant material requirements; integrating forecasting, planning, and materials management functions; and restructuring master data.
If you want to learn about inventory management best practices, download your complimentary eBook, CONQUERING OPERATIONAL RISK—ALIGNING OPERATIONAL AND CUSTOMER-CENTRIC APPROACHES: A SURVIVAL GUIDE FOR MANUFACTURING LEADERS, by filling in the form on this page.