What’s really wrong with Cloud Inventory Management

  • Richard Thelwell
  • October 28, 2014

Cloud Inventory ManagementRight now, Cloud inventory management is hot. Frustrated with the poor performance of their existing on-premise inventory management solutions, companies are turning to the Cloud for inventory management that’s better, faster, and cheaper.

In one sense, they won’t be disappointed. As with most migrations of enterprise applications to the Cloud, Cloud inventory management will indeed turn out to be better, faster, and cheaper. But here’s the rub: it still won’t solve the inventory management problems that many businesses are experiencing.

Why not? Because Cloud inventory management simply replicates the functionality found in on-premise inventory management solutions and ERP systems. This matters, because it’s that same functionality that is responsible for the inventory management problems that businesses are experiencing today.

Cloud inventory management: here are the real problems.

So what are these inventory management problems? You’ll recognize them straightaway.

Simply put, there’s often too much of the inventory that isn’t selling—and far too little of the inventory that is selling.

Cloud Inventory Management Excess Stock
Cloud Inventory Management Problems – Excess Stock

The result? Disappointed customers, stockouts and lost sales—combined with shelves groaning with inventory that nobody wants.

And in today’s business climate, lost sales and disappointed would-be customers can be very bad news indeed. Moreover, the financial drain of financing all that unwanted inventory can be crippling.

So what’s to be done?

Cloud inventory management: get the answers that you don’t have.

Step back for a moment, and think about how inventory management systems work. You start with a demand forecast, and look at past demand to calculate the demand variability to apply to that forecast to get at a safety stock figure. Apply a lead time, set a level of working stock and safety stock appropriate for that lead time, and you’re done.

The trouble is, that process is very mechanistic. And its integrity depends entirely on the integrity of the numbers that have been plugged in.

Yet in many cases, those numbers turn out to be ‘broad brush’ estimates, guesses, or even wishful thinking.

And if reality doesn’t correspond with the numbers that have been plugged in, then—hey presto!—you’ll get the problems we’ve seen.

So it’s very important to figure out the real lead times that apply. And to understand those factors that really affect demand. And to clean up sales data so as to get to real demand variability.

None of which, sadly, is a Cloud inventory management system very much help with.

Cloud inventory management: better informed with Cloud analytics.

Which isn’t to say that the Cloud can’t be of help. For it certainly can—in the form of quickly-implemented, low footprint, high-ROI Cloud analytics.

Cloud analytics that can make existing inventory management systems deliver better results, by providing accurate ‘real life’ data to plug into safety stock and lead time formulae. Whether those existing inventory management systems are on-premise, or in the Cloud.

Cloud Inventory Management Cloud Analytics
Delivering better results with Cloud Analytics

And do so, what’s more, both quickly and easily. Because cloud based inventory analysis—delivered through a Cloud BI solution—can be implemented in a matter of weeks, requires no additional skills to master, and can deliver inventory analysis insights via reports, dashboards, or chart based analytics tools.

How many weeks, exactly? Typically, four to eight weeks, from signed order to users being trained.

True Cloud inventory management: what does it cost?

So what’s the cost? In one sense, the answer is ‘not very much’. Matillion’s Cloud-based ‘inventory analytics as a service’ model, for instance, wraps the entire cost into a one-off fixed price set up, together with a monthly subscription fee: no hardware, software, or further consultancy required.

But in another sense, it’s free, because a Cloud-based inventory analytics project is entirely self-financing.

Better stock availability leads to higher sales, and increased profit. And lower levels of slow moving or unwanted inventory free up cash—cash which can be returned to the business, or used to finance inventory that is in demand.

Higher sales, happier customers, faster inventory turns—and less inventory. What’s not to like about that?

If you would like to find out more about Cloud Inventory Management and Cloud Analytics, download our complete guide to Business Intelligence solutions today.