Inventory Control: Factory Floor On-Line Benefit

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Information technology is probably the most powerful tool applied to improve efficiency in the business world today. ICT solutions are applied in almost all business operations and they have undoubtedly solved a myriad of problems which have in effect made doing business as much smoother and efficient undertaking. The supply chain forms the heart of business processes and if competitive, the entire business process is seen as being superior to others. The entire span of movement from the suppliers to the customers is continually going through upgrading by incorporating information technology. However, experts assert that the production floor has not received adequate attention in terms of application of online solutions. This makes the production floor the weakest link in the entire supply chain. Many equipment manufacturers still lie behind technology and do little to provide room for complete real-time interactions between the factory floor and other units or functions. This paper looks at how a company would benefit from putting the factory floor online especially in respect to inventory control.

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It is clear that the most important challenge for manufacturers today is associated with competitive pressure. This pressure emanates from the need to meet the customers’ requirements to the highest level possible. Customers are dynamic, requiring frequent adjustments to the production process to either slow down or quicken production. Proper and effective decisions on how to adjust the production process can only be informed by complete and accurate information. Engaging production in an online environment offers a perfect platform for obtain information in a timely and complete manner (Steele, 2001, par4).

Cost savings accruing to the use of internet across the supply chain is estimated to be between 6% and 8% yet the same is not fully utilized at the floor of the factory. It is estimated that operating on a fully online mode at the factory floor would lead to the savings improving to over 10%. This can basically be understood by looking at some basic inventory control processes. Stocks are ordered for and arrive after a stipulated lead time. They may then be stored awaiting production as it may not be very clear the exact time when they are to be utilized. This then necessitates warehousing which depending on the nature of the raw materials may be a very costly undertaking. Employing an online system can ensure that the procurement division has up to date information on the exact time when additional inputs may be required hence doing away with the storage costs (Drickhamer, 2001, p654).

This concept has been integrated in the Just In Time JIT system known for its successful application by Japanese companies and specifically Toyota Motor Corporation. The system has been largely credited for the thrust with which Toyota became the world leader in car manufacture and the fact that it has remained on top. The system is superior to others especially in terms of efficiency (Drickhamer, 2001, p659).

The JIT system heavily relies on constant flow of information from the production floor in order to make timely purchases from suppliers who are also fully evaluated to meet some strict criteria to ensure ability to meet expectations. The system also integrates suppliers as well as customers in the supply chain and requires employment of Total Quality Management at each link of the chain in order to work efficiently.

The benefits associated with using an online system cut across the different units. As has been mentioned above, the online system has the potential to significantly reduce lead time during procurement process. This has the effect of reducing throughput time for the organization. In addition, the overall quality of production is not only improved but also sustained as processes of quality control are made easier by the system’s ability to improve communication (Alexander, p76).

Again the online system creates a platform through which the production floor can be integrated with other functional units’ in the organization. The most critical unit benefiting from such integration is the accounting division. Financial accountants are able to obtain a different and more reliable source of information as well as managerial accounting acquires vital information for continued decision making.

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In some of the most modernized industries such as computer manufacturers and those manufacturing semi-conductors, there have been open demands to their suppliers to ensure that their factory floors are connected to the internet. This way the companies can not only track their orders but also effectively plan on the time it will take to receive them. This requirement for e-manufacturing is continually driving many companies dealing with big multinational to put their floors online as not doing so creates a real threat to their ability to survive in the future. The future is only based on their responsiveness to the requirement for e-manufacturing (Gould, 2002, p230).

Online systems on factory floors also enhance higher organizational discipline and managerial involvement. Discipline is improved in the sense that the online system is able to expose cases of indiscipline on a much wider scale. More activities are monitored and information stored meaning that employees have to adhere to most of the stipulated activities as failure to do so will definitely be discovered. The ultimate result of better adherence to stipulated regulations is improved productivity among employees (Gould, 2002, p234).

Clearly, the online systems crate a channel for improved communication both internally as well as externally. Improved external communication has the effect of improving customer satisfaction, building on the image of the company in the lines of integrity and transparency as well as creating royalty among all stakeholders.

It is true that the costs of introducing online systems may be enormous especially due to the fact that those developing industrial equipments are yet to fully embrace the system. Additional equipment with new technologies which in most cases would be tailor made for specific production processes could require heavy initial outlay hence many companies are unable to enact the systems. In addition, implementing the online system at the floor of the factory may require a complete overhaul of the entire system of operation which could lead to a surge in administrative costs incurred in making adjustments.

In conclusion, despite these real challenges, it is clear that the long-term benefits of putting in place online systems on the floor of the factory are immense. Inventory control is the biggest beneficiary leading to a huge saving on the part of the company. Almost all the challenges of procurement and storage are solved by the system. However, the online system also improves the functioning of several other equally important departments in the company.


Alexander, M. (2001).Factory Floors Go Online — Pioneering manufacturers close the final gap in their supply chains. InternetWeek. Manhasset.

Drickhamer, D. (2001). Peak performance. Industry Week; 250, 8; ABI/INFORM Global

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Gould, S. (2002). Effectively managing inventory in the supply chain. Automotive Design & Production; 114, 8; ABI/INFORM Global

Steele, L. (2001). Cost drivers and other management issues in the JIT supply chain environment. Production and Inventory Management Journal; Second Quarter; 42, 2; ABI/INFORM Global

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