Data Sharing Will Drive the Next Generation of Inventory Management

January 23, 2024 - 11 minutes read

Sharing real-time data with customers and suppliers is becoming a necessity.

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In the days before the internet, sharing data between companies was difficult at best. Surprisingly, the dawn of the digital age did little to change the status quo of siloed inventory management that had existed for decades. In recent years, part shortages, delivery disruptions, and a hyper-competitive E-commerce landscape have chipped away at these barriers by highlighting the importance of real-time visibility.

Getting to the next plateau of data sharing will require a dedication to technology and standardization, and an erosion of the obstacles businesses have erected to maintain their competitive advantage through secrecy rather than collaboration.

Why is data sharing important?

To complete production, fulfillment, and storage activities efficiently, accurate data is essential. Unfortunately, much of the data companies need to maintain visibility resides outside their own walls in the hands of external partners and suppliers. If we are to migrate towards a transparent global supply chain model, more businesses must appreciate the benefits of data sharing, which include: 

• Improved collaboration: Sharing critical information benefits both the vendor and customer by minimizing surprises that can lead to disputes and strained business relationships. Data sharing also reduces the bullwhip effect that comes from inaccurate predictions of demand.    
• Cost reduction: With improved visibility into their suppliers’ inventory on hand, in transit, and on order, companies can decrease their reliance on overstocking and hoarding by shifting to a just-in-time inventory management model.
• Data-driven order fulfillment: With so many options to choose from, customers demand delivery dates that are fast and accurate. Order management software supported by layers of supply chain visibility can ensure the parts and services needed to fulfill orders are available as expected.

“The core advantage of data is that it tells you something about the world that you didn’t know before.” – Hilary Mason

6 keys to the future of inventory management data sharing

The benefits of data sharing over inventory management software platforms are obvious, but the path to implementation includes a few hurdles. With major disruptions to global supply lines expected to occur every 3.7 years on average, it is essential to eliminate siloed inventory management practices that make it difficult to respond to a crisis.

Taking steps towards improved data sharing through the implementation of technology and cultural changes will lead us to a more resilient and efficient future.

1. Standardization

For data to be shared openly between organizations, data formats and exchange protocols must be standardized worldwide. A lack of standardization makes it impossible to transfer data in real-time and can lead to long delays or errors when one data format must be translated into another.

In recognition of the importance of standardization, the American Supply Association (ASA) established a cross-functional team to develop standard templates for ERP, PIM, and E-Commerce data transfers. The electronic data interchange (EDI) standard used to govern electronic B2B data exchanges for decades is also undergoing a modernization effort to support more data-intensive applications.

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2. Data sharing agreements

Confidentiality and privacy are always primary concerns, especially when customer information or intellectual property is shared throughout the supply chain. A data sharing agreement is a useful tool for detailing the types of data to be shared, how it is shared, and who has access. Additional topics that might be included in a data sharing agreement include:

• Security protocols to be followed

• Applicable regulations and compliance issues

• Responsible parties at each company

• Data ownership terms and conditions

Data sharing agreements can be established between two or more companies, depending on the complexity of the supply chain. Written agreements go a long way towards building trust, visibility, and collaboration between companies.

3. Putting APIs to work

Application programming interfaces (APIs) ensure all manner of services and applications communicate with one another effectively. APIs can also be used to integrate an organization’s inventory management system with selected partners. To improve data sharing practices in the future, each organization will need to decide what types of APIs are needed and how their architecture will be configured.

As data standardization efforts continue, APIs will help bridge the interoperability gap by seamlessly and reliably translating data formats, including XML and JSON, to facilitate faster transfers. As data formats change, APIs can be updated quickly to support the new models. APIs can also be monitored and metered to keep tabs on how, where, and when data is accessed.

“The API economy is how the production, distribution, or trade, and consumption of goods and services by different agents occurs on the global internet.” – Kin Lane

4. Data security

Along with privacy concerns, the rising occurrence of cybersecurity incidents can also be alarming for companies looking to ramp up confidential data transfers, since increased data sharing also increases the number of exposure points. Risk assessments help assess the threat landscape and the potential vulnerabilities before deciding on tools and protocols to prevent important customer and company data from being compromised. 

Authentication practices and data minimization policies also play an important role in preventing security issues from undermining data sharing benefits. Vendors can be tiered based on the access they require so that only necessary information is shared, and access controls are appropriate. These practices minimize exposure as they help ensure compliance with security regulations and build customer confidence.

5. Cloud-based solutions

Universal data sharing will require more storage capacity, scalability, and efficiency, and cloud-based solutions will help achieve these objectives. Rather than sharing data directly with customers and suppliers, businesses can leverage the immense capacity of the cloud to establish a centralized database with well-defined access controls.

Cloud platforms offer analytics and machine learning capabilities that allow big data sets to be interpreted more effectively and trends to be identified earlier. The cloud will also provide essential infrastructure for millions of internet of things (IoT) devices utilizing RFID tags and other types of sensing to collect valuable real-time inventory data.

6. Putting customers first

How does data sharing for inventory management help you put customers first? Along with labor shortages, shuttered factories, and unpredictable demand, siloed inventory data has contributed significantly to the bloated inventory levels, delivery bottlenecks, and long lead times we have witnessed in recent years.

These supply chain disruptions frustrate manufacturers, distributors, and carriers because they lead to dissatisfied customers who may take their business elsewhere as a result. Improved inventory management data sharing is a remedy that must be developed to minimize future disruptions.

Challenges for inventory management data sharing

Technology, regulations, and cloud-based solutions are evolving to support open and expedient inventory management data sharing, but widespread adoption will require overcoming some long-standing challenges:

• Competition: Many industries will experience increased levels of foreign and domestic competition in the coming decades. Despite the existence of privacy laws and data sharing agreements, many of these organizations will be reluctant to share information with suppliers who also work with their direct competitors.
• Data silos: Concerns over privacy, technology barriers, and disconnects between departments continue to create data silos within organizations. These internal walls must be removed before data can be shared effectively with external partners.
• Cost implications: Infrastructure, data preparation, and security measures come at a cost that companies must be willing to pay before they can enjoy the benefits of data sharing. For some, the expense may continue to outweigh the expected advantages.

The future of data sharing: Final thoughts

Human nature compels us to keep information close to the vest, especially when we believe this information gives us an edge over the competition. In recent years, supply chain disruptions with long term implications have shown us that a balance between privacy and transparency might be an equally valid avenue to business success and satisfied customers.

Agiliron recognizes the importance of data sharing, with an advanced software suite featuring inventory management, customer relationship management (CRM), mobile point of sale (POS), and order management software designed to integrate seamlessly with all your favorite E-commerce applications.   It’s no surprise that over 2,500 brands rely on Agiliron to power their business.

The best inventory management software and tools of today will support the data sharing and integrated supply chains of tomorrow. We can help you leverage the power of data sharing without compromising the privacy and security of your business. Contact us today and let one of our solution experts share their knowledge and insights on this important topic.

Tags: Business Management, inventory management