How Low-Cost, Critical Inventory Impacts Revenue Recognition

 

There's a very basic difference between cost and value. The cost of a particular part, or component, for example, could be very small. However, without that part taking its place in a high value product, that product would be worthless. In contrast to its cost, its value is extremely high. In fact, a $10 dollar part could easily be mission-critical.

Murray Dunn, CEO of Intelyt

Today's business environment demands that businesses seek out efficiency and opportunities to optimize every aspect of operations. Part of that optimization can take place at the supply chain level. Supply chains across the world are filled with high value components and parts that may cost very little individually, but which are critical to business success. Visibility into supply chain operations is critical in order to maintain, or even increase, product margins, and to ensure that contracts are met, and product reaches market at the right time.

Downstream Butterfly Effect

Let's take, for example, a company that supplies coffee makers to the airline industry. That coffee maker is not especially complicated. However, there are several specialized components that are critical to the overall specification of that warmer. Its temperature sensor is simple, but must sense temperature—its critical task—within very strict tolerances:

·       It must not be sensitive to extremes in ambient temperature

·       It must not be susceptible to air pressure variances

·       It must not be sensitive to shock and vibration

These environmental factors can compromise temperature sensors, and they are critical for aerospace applications. If the sensor unit doesn’t arrive at the production line on time, or is damaged in transit, a company supplying the coffee maker cannot ship product to its clients. Orders can't be filled and invoices can't be issued.  Revenue cannot be recognized.

Unfortunately, missing shipments are often not noticed until they're needed. Damage to sensitive parts isn't noticed until the components are tested. Under these conditions, recovery is a very expensive task, and can erase the entire financial margin from a product. Parts must be reordered and shipping must be expedited—both costly and time consuming. In the meantime, production lines move on to other things, product is late, invoices are held. Quarterly or yearly financial goals are missed, and analysts could downgrade the future expectations for performance.

This is a classic "butterfly effect", where a small factor, such as insufficient visibility into the location or condition of a box of $10 dollar parts, could erase millions of dollars from a company's market capitalization, jeopardizing its very existence. All because a shipment got lost, or dropped, or worse, and no one knew about it until it was too late.

Protecting Critical Shipments, No Matter the Cost

The Intelyt Solution protects shipments of value, no matter the cost. When parts that come from anywhere else are part of a high value, mission critical product, Intelyt's solution offers transparency and control over the entire shipping process. A shipment is commissioned using our secure application, and the tags are dropped into every carton in the shipment.

Our product is thoughtfully engineered by engineers with extensive supply chain experience to provide insight into conditions beyond location—things handling and environmental factors. If any condition exceeds the custom tolerances you set, an immediate alert is sent that is independent of your suppliers and carriers, allowing you to act immediately. Greater visibility into shipment conditions, along with location, allows companies to be proactive in supply chain management.

We give our clients peace of mind in knowing that their critical assets are where they're supposed to be, under the right conditions, no matter their cost. We know that the value of shipments has nothing to do with the cost of the materials inside—it's only realized when they reach their destination safely and on time.

The value for clients is much more than a simple battery-operated device used to track a $10 dollar sensor—it's in protecting your supply chain, getting that $10 dollar sensor to the manufacturing line at the right time, and in the right condition, allowing the coffee maker to be built and shipped on time.

No matter the industry, we know that supply chain reliability is critical to the efficient operation of any company. Intelyt's iTags solution will bring unprecedented visibility and critical accuracy to your supply chain operations.