How do algorithms support dynamic stock replenishment?

Contemporary supply chains must respond flexibly to changes in market demand, and the disappearance of some trends and the emergence of new ones is very dynamic. The consequence is the need to reorganise the supply chain: to adjust to changes in the demand for specific components or raw materials. Without packing planning algorithms, which can quickly process a huge amount of data, it is practically impossible.

A flexible supply chain is a prerequisite for efficient monitoring of inventory levels and shifting goods among distribution centres, warehouses and stores. Hau L. Lee, a professor at Stanford University, believes that organisations with well-designed supply chains are able to accommodate market changes even before they happen1. Changing supply sources, relocating factories or production outsourcing should be applied proactively, not reactively.

You cannot have a flexible supply chain without efficient packing

The smooth operation of the supply chain depends on many factors, two of which are of key importance: transport and warehousing. They are the bloodstream that connects manufacturers, suppliers and customers. The efficient flow of raw materials, components and finished goods is a constant movement of cargo between different storage and transport spaces. The better the space is used, the lower the transport and storage costs.

Designing the flow of cargo in the supply chain requires considering factors, including, but not limited to :

  • adjusting the time and terms of delivery to the type of cargo – many goods require special transport conditions and deadlines for delivery – perishable products are a good example,
  • the need to change the means of transport – the reason may be the delivery location, the required delivery time, weight or dimensions of the goods,
  • change of the delivery route – may be caused by natural conditions (natural disaster), political situation (riots, war), economic situation (e.g. a sharp increase in transit fees),
  • failure of the means of transport – e.g. a failure of a container ship makes it necessary to reload a large amount of cargo to alternative means of transport.

These are only selected reasons affecting the reliability of your delivery. The day-to-day handling of the events listed requires prompt packing planning. Performing this task “on paper”, and more precisely in a spreadsheet, is possible, but very time-consuming, inefficient and prone to errors. A good alternative is the use of packing planning algorithms. Thanks to them, you can make instant decisions about the choice of the means of transport and the place of storage.

It is enough to have information about free storage space and the load capacity of means of transport to optimise the use of your fleet and warehouses. Packing planning algorithms do nothing more than that which can be done manually, but they perform their operations in fractions of a second and are always correct. Using these tools will not only improve your current operating processes, but also give you a chance to overcome one of the biggest problems in supply chains, which is over-stocking.

Optimising production is a fight against excess inventory

The accumulation of large stocks of raw materials and components necessary for production is synonymous with rising storage costs. In line with the widely recognised lean manufacturing philosophy, reducing inventory volumes is a key area in ‚Äč‚Äčoptimising production processes. It is an attempt to supply raw materials and components on a just-in-time basis, in exactly the quantity that is needed to sustain production processes.

Reducing the amount of inventory also has another side: you only supply the raw materials and components that are necessary, which means that you do not unnecessarily burden your transport fleet. In other words: by optimising inventory, you optimise transportation, personnel and fuel costs as well as the costs of many other areas of business activity. Moreover, in the event of a change in market demand, you do not face the scrapping of raw materials and components from production centres that will no longer be useful because the demand for a specific product has ceased. In this way, you don’t bear the high cost of removing stocks, which does not generate any business value.

Prioritising goods reduces transport costs

Inventory management involves prioritising loads. High priority loads are first to be loaded and shipped. The goal is to ensure the flow of the loads that are necessary to maintain production or sales processes through the supply chains. Thanks to this, it is possible to stop transporting “for stock”, and at the same time to fully meet demand. Priority setting is not based on a once established rigid plan, but is a reaction to changes in the market that affect production processes. Instead of struggling with the problems of storing and securing currently unused components, you can focus on ensuring the smooth flow of those loads that determine the ability to keep production lines running, to sell goods or provide services.

An example of how important flexibility and proactivity are in the supply chain, is the production of hand sanitising fluids and masks in the early stages of a pandemic. After the announcement of the emergency, masks and disinfectants disappeared from the shelves. After a few weeks, no one had any problems with purchasing personal protective equipment, and prices returned to normal. Manufacturers responded correctly, although they did not manage to implement Hau L. Lee’s recommendation to take action before a significant market change occurs.

An optimal way to route specific loads for transport requires a dynamic and flexible automatic packing planning. This is a task solely for the algorithm, which needs only the input of appropriate data to give a result in a fraction of a second. Planning of packing goods according to priority is practically impossible without properly adjusted algorithms. Without them, the quick calculation of the cargo space needed for packing requires a lot of separate calculations and is at risk of serious errors. The algorithm gives the correct results and creates visualisations of the arrangement of any number of loads with different parameters. As a consequence, materials, raw materials, components and goods with the highest priority will always be in the right place in the supply chain and will reach their destination on time.

If you would like to check out how our algorithms work, please use the demo versions. If you can’t find what you need, please contact us. Together, we will come up with a solution that will ensure the security of the supply chain in your company.

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Bibliography:

 1 Hau L. Lee in: The Art of Supply Chain Management, Collective Work, ICAN Institute 2013.