Interview with Matthew Bardell, Managing Director at nVentic
1. Tell us more about nVentic’s proprietary analytical tools and how helpful they have been in serving the manufacturing sector.
nVentic has created a range of analytical tools that offer our manufacturing clients with insights into their inventory imbalances, thereby helping with root cause analysis and enabling a very effective decision-making. The tools, apparently, enable us to apply the most advanced statistical methodolgies to big data sets, avoiding imprecision of heuristics. This is deliberately done outside of the planning workflow itself so that our clients can pretty much gauge the sensitivities. This proactive methodology in every way enables us to rapidly go ahead and identify tangible improvement opportunities at the item level. Due to this, our clients typically experience inventory reductions which range from 20% to 50%, all while elevating or maintaining service levels. Another constant challenge with optimisation technology is the quality of master data in underlying systems. To address this concern, we have developed a range of automated data quality checks. These checks effectively pinpoint areas where data of the clients may as well need improvements, enabling them to enhance precision and also reliability of their optimization processes. Through making the rightful use of these automated checks, our clients can have much better confidence in the integrity of their data, hence leading to more accurate and also informed decision-making.
2. You are not only working with a range of clients today but are also engaged in the further development of nVentic’s tools. Can you offer some insights into it?
The fact is that inventory optimization is indeed inherently complex because of numerous variables that are in a continuous state of flux. It also depends on the operational science knowledge level that is typically limited to just a few. However, businesses are looking out for practical solutions that can easily be comprehended and used by their teams. So as to address this very issue, we are in the process of developing an intuitive user interface that allows our clients to take advantage of our advanced analytical tools without even having specialist knowledge. Our objective is to empower businesses with a very robust yet user-friendly solution that rolls out optimal results while at the same time, promoting right adoption and understanding within their organisations.
3. How does nVentic improve one’s inventory position significantly and sustainably?
We offer our clients visibility into where their biggest inventory enhancements are to be made and give them practical steps so as to attain those improvements. We help them to gauge the attributes of their different inventories and how best to go ahead and manage them.
Root cause analysis also enables in identifying the underlying issues that continuously hold inventory optimization back. Too many inventory initiatives depend on top-down pressure and the execution of a novel technology, but inventory is inherently intricate and there are no silver bullet which exist.
We help clients across all stages of inventory management maturity understand what is actually leading to their inventory imbalances and address those challenges in a systematic manner, prioritised to thrust value realisation and make it more sustainable.
By way of offering clients with these valuable insights and a systematic approach so as to address inventory challenges, we empower them to make certain informed decisions and optimize their inventory management practices in a much more effective way.
4. What is the role of artificial intelligence when it comes to inventory optimization? What efforts have been made by nVentic in this field?
Although there are a number of techniques that are pretty often referred to as AI in particular cases which call for it like multiple regression, hill-climbing and bootstrapping, we tend to rather avoid the phrase artificial intelligence, as it doesn’t really tell you what the tools are actually upto. The heart of our approach is pretty well-established and scientifically grounded approaches within the spectrum of inventory science.
There are some who use AI to find patterns in big data sets, however, compared to our approach, which is looking for very accurate traits in the data, that is an energy and time-intensive way of going about things which by the way also leaves you at the end in a catch 22 situation of the true significance of any pattern found.
Of course, exciting advances are indeed being made in the AI spectrum, and we incorporate them with all acumen where they genuinely enhance value. Nonetheless, it is necessary always to keep in mind that any sort of a tool will only be useful if it is used. Therefore, it is very pivotal that these tools are comprehensible to human users, enabling them to grasp the underlying principles and comprehending the sensitivities of the decisions being made.
Through prioritising transparency, efficiency along with human understanding, we are building inventory optimization tools that can very well empower planners to go ahead and make informed decisions, ultimately leading to elevated inventory management practices. Whether or not some of the approach is at present called AI or not is of secondary significance.
5. Tell us something about the inventory optimization algorithms that nVentic applies.
We have put together more than hundred statistical routines that go on to assess actual inventory flows, through using detailed data extracted directly from the ERP systems. We compare actual inventory levels along with the optimal inventory levels and present these deltas back to the clients along with a spectrum of insights that help them to quickly prioritise and take care of the imbalances.
While our advanced algorithms automate the processing along with the analysis of this data, it is pretty significant to note that our framework is pretty robustly rooted in inventory science that we document completely. This makes sure that the clients can always check the underlying basis, assumptions along with sensitivities that inform the overall evaluation. We prioritise transparency and also leave no stone unturned to provide our clients with an absolute understanding of the methodology, thereby helping them to have confidence in the outcomes and make well-informed decisions with regards to their inventory optimization strategies.
6. Inventory optimization holds the key to the success of a manufacturing setup today. What do you think engages the clientele since the competition is pretty tough in this domain?
Companies go on to assume that if they make the optimal strategic network decisions and have the perfect planning processes and tools, they will then they will possess exact inventories. What we in a way continuously find is that organisations put-in massive efforts into digital transformations but often go on to see little or for that matter no alterations to their inventory levels or even performance. Even where major improvements have been made, our diagnostics routinely finds that there are more double-digit improvements which are possible. Some clients choose to working with us accurately because they have hit a wall in the improvements, they can deliver themselves.
nVentic’s approach goes on to put inventories front and centre. We begin with the detailed inventory data and demonstrate clients what it tells them about supply chains. Our clients routinely make double digit enhancements to their inventory position in a matter of few months, and from there point out towards more structural challenges in a sustainable way. At the end of the day, this speed to value and deep expertise is what lets us to be the difference against some of the much bigger competition in our field.
7. Why do you believe the entire top-level executives and the team should be in sync with their inventory, as in where it stands, how fast it depletes, geography, etc.?
Inventory is indeed a strategic lever that majorly effects as well as reflects the efficiency of your working capital, the operational flexibility and the overall resilience of your business. Unfortunately, the C-suite has more often than not considered inventory as just a tactical or operational concern, which apparently is delegated to personnel many levels down the organisational hierarchy.
But the supply chain turbulence over the last few years has indeed given a wake-up call for executive boards, shedding light on strategic significance of the supply chain overall and especially, the critical role that’s been played by inventory management. This has led to better progress in terms of basic visibility. It may seem pretty steep to believe, but even for many of the biggest companies in the world, it has until recently been impossible (and for some it still is!) to even gauge what inventory you have where in anything close to real time.
At nVentic we are concentrated on taking this one step further – from what inventory you have to what inventory you really require. Here too there exists a disconnect between a board-level view, which can get mystified why so much inventory is required, and the planners at the operational level, who face multiple challenges in the day-to-day management of inventory. When these two groups are brought into sync then transformational results are indeed a possibility.
8. There are a lot of sustainability discussions taking place these days. How can inventory management in a manufacturing setup help in this regard?
Inventory management practices which are ineffective often result in the accumulation of excess inventory, thereby at the end of the day leading to obsolescence. Obsolete stock happen to represent wasted use of resources such as energy, materials, storage, maintenance along with transportation. Inventory management has in a way been neglected as a lever in sustainability, since organisations are already financially motivated so as to avoid waste. But for many organisations, especially when it comes to high-margin industries, inventory obsolescence is just seen as a cost of doing business. Nonetheless, as sustainability becomes a greater priority, inventory obsolescence should also become a greater area of focus.
9. Considering the $163 billion inventory pile-up, how can businesses help rescue the stock, and what has nVentic done in this regard?
Inventory excesses are just like an overflowing bath. The first thing to do is to go ahead and switch off the taps which in a way means quickly identifying where you have excesses and halt buying or manufacturing them. Simultaneously, efforts have to be made to deplete the present excess inventory. The worst thing to do with present excess or obsolete inventories is ignore them or in a way hope they go away. Obsolete inventory has to be regularly identified and disposed of as it incurs storage along with management costs.
At the same time, it is also necessary to assess whether excess inventory is going to naturally diminish over time or if proactive measures like active discounting, are needed so as to expedite its depletion. nVentic’s analytical tools evaluate and categorise inventories in order to enable our clients to get their inventories back under control in a much accelerated way.
10. Tell us about the real-world inventory crisis and how equipped nVentic has been in this regard.
The last few years have been a witness to many issues pertaining to supply chains. The Covid pandemic restricted movement and led to domestic production shut-downs, while the consumers stuck at home switched their spending from services to goods, thereby leading to a surge in demand. Moreover, major occurrences such as trade disputes, Ukraine war, and Brexit further aggravated the disruptions within supply chains. This put pressure on supply chain capabilities and many organisations looked out to protect themselves by raising the inventory.
The challenge is that it is frequently hard to forecast specifically which items are likely to experience shortages, so organisations do their bit to increase inventory throughout the board. For example, if a product needs 100 sub-components, shortage of just one sub-component can place the production at a standstill, despite the warehouses getting filled with increased inventories of the other 99 sub-components. This simple instance showcases why excess inventories and shortages often go together which in a way may seem to be seem paradoxical.
Over the last year, inflation, which has been majorly driven by the effect of the war in Ukraine has had on energy prices, has suppressed the demand, just when organisations are flush with inventory. nVentic has helped the clients to overcome this storm by helping with targeted inventory diagnostics – inventory optimization is not about the inventory reduction or inventory increases per se, but it is more about the understanding where you have to buffer inventories and that too by how much, and by making sure to avoid inventory excess.
