5 Inventory Management Tips for Unpredictable Times
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Ensuring the right amount of product in the right place and at the right moment is tricky. An inbound shipment coming late, an incorrect entry on the spreadsheet, or a sudden, unexpected uptick in demand for a particular SKU can throw the best-laid plans out the window. It can leave you scrambling to keep products in stock and ready to ship.
Most organizations learned in 2020 that a global disruption could quickly turn your best inventory management strategies on end. In the early stages of the pandemic, suppliers of toilet paper, personal protective equipment (PPE), and cleaning products were among the hardest hit – it was nearly impossible to keep these items in stock.
As the pandemic wore on, almost everything – especially lumber – was in short supply at some point. Shortages and supply chain interruptions forced companies to rethink their inventory management practices.
For instance, many found that just-in-time (JIT) inventory systems didn’t fit changing business models. And, as the economy began to recover, adding workers was next to impossible due to the labor shortage. Still others found out the hard way that clipboards and spreadsheets really were not the best tools to track products in the distribution center or warehouse.
Buying forward and stocking up
For many companies, the knee-jerk reaction to the latest spate of supply chain shortages was to overstock and overbuy in hopes of circumventing some of the earlier problems. This not only increased inventory carrying costs, but the “scarcity” mindset further constrained supply chains.
Norm Saenz, Managing director at St. Onge Company, said companies that began “buying forward,” or overbuying, during the pandemic assumed they could return to more normalized stocking strategies sooner rather than later, but that didn’t happen.
“A lot of companies are still worried to have inventory on-hand to sell. They will continue with some overbuying, buying forward and overstocking of inventory in case supply chains become constrained again. Looking at the retail shelves currently, it’s obvious that inventory is still a problem.”
Read more: Top 7 Benefits of Having Accurate Inventory
Managing in a new world
Following an event that threw manufacturers, retailers, and distributors around the world into the unknown also pushes companies to reimagine how to track inventory and manage sales, orders, and deliveries. For instance, companies that used paper, clipboards, and spreadsheets to manage inventory – and found its products in high demand or raw materials in short supply due to the upheaval – turned to technology to run “what-if” scenarios, identify critical supply bottlenecks and determine future risks.
Bill Brooks, VP at Capgemini’s North America transportation portfolio, said companies must have accurate and available data to run projections, review historical activity, and make good inventory management decisions.
“There are various applications available to assist with the process.”
For instance, if a particular carrier or route repeatedly created a supply bottleneck, companies pivoted to bypass the transportation provider, distribution hub, and route to keep inventory levels as high as possible. Other companies temporarily forged inbound freight plans to take whatever they could get, e.g., instead of receiving a full truckload of merchandise, companies opted to receive partial shipments and wait for the remainder to be fulfilled via parcel once products became available.
Ready, set, go
It’s time for creativity and flexibility with inventory management. Companies need to think outside the box to solve issues and need to solve immediate inventory problems and plan for future inventory issues.
Here are five inventory management strategies that organizations can use to both manage current volatility and optimize for the future:
1. Conduct a complete inventory management self-audit
Begin with an honest, introspective look at current inventory management practices. Figure out what you are doing wrong and understand the changes you need to make. Those initiatives that you may have been able to put off for six to twelve months (e.g., adopting a new supply chain visibility platform) must now be addressed. Find areas you can control and improve upon. Consider the following:
- Do you have enough people to manage the process?
- Are they well-trained?
- Have you infused enough automation into the inventory management process?
Ask yourself whether you have the right software in place and what other data can be used to make the best inventory management decisions in the future. Your goal is to simplify inventory management processes to the point where you can reduce touches and costs.
Learn about: What is Reverse Logistics? How Does it Impact Your Inventory?
2. Don't sugarcoat it
As you work through the self-audit process, Brooks advises companies to set aside the rose-colored glasses and be brutally honest with their self-assessments. If you have a preferred supplier that’s late for no apparent reason, it’s time to find an alternate supplier.
If your transportation costs are going up because you have to keep sending out same-day/next-day orders, your stocking strategies need a reboot. “Your company leaders, bosses, shareholders, and customers will appreciate your honesty,” says Brooks, “and that you are working toward a resolution on the items.”
3. Rethink just-in-time – at least for now
An inventory management strategy that minimizes inventory and increases efficiency, the just-in-time (JIT) model, has come under fire. The concept of JIT was popularized by Toyota, and it emphasizes production of only what is needed, when it is needed, and in the amount needed. Over the years, JIT became a part of Toyota’s infamous “Toyota Production System” (TPS). The goal of TPS was to completely eliminate all wasteful activities in the pursuit of excellence. And while there’s more to the story, JIT inventory management should be suspended while the world’s supply chains right themselves. Don Derewecki, Senior Consultant at St. Onge Company warns:
“At macro level, many companies that used very tight controls over inventories find that, with the supply chain situation as it is, they are struggling to get the inventory they require. The pandemic has thrown some bolts into the JIT machinery that no one anticipated two years back.”
4. Automate more inventory management processes
With the labor market as it is, more companies are turning to technology to manage inventory. Warehouse management systems are used to manage activity within a company’s four walls.
Software as a service and cloud options are helping organizations collaborate across supply chains and enjoy visibility of shipments as they make their way through the end-to-end supply chain. Brooks views technology not as a replacement for human labor but as a great facilitator allowing employees to focus on more essential projects.
“We are at a point where companies must automate as much of the process as possible.”
Saenz concurs, saying most of St. Onge’s current projects involve installing automated systems in facilities.
”Automation lets companies maximize the employees’ value and leverage the minds and skillsets for value-added opportunities. Automation lets you gain tight control over the inventory and there’s less risk to lose or misplace inventory. For instance, simply automating the storage environment may help improve inventory accuracy.”
5. Hope for the best, but prepare for the worst
“Be prepared for the worst,” Derewecki advises. And while it seems like a pessimistic business approach, tough times call for tough decisions.
Ask yourself questions like:
- What happens if we can’t get X product?
- What can we get as a replacement?
- And in case there is no replacement, how can we better manage our customers’ expectations to better run the businesses during times of frequent supply chain shortages?
These five tips are useful for inventory management in uncertain times. They will help you maintain long-term, valuable customer relationships.
Are you looking for inventory management software for your business? Cin7Orderhive’s inventory management software is one of the best and it’s easy and effortless to use. It takes care of all your business operations so you can focus more on other aspects of your business.
Dev Upadhyay enjoys writing on a variety of topics and takes pleasure in immersing himself in learning about new and exciting areas. He loves to binge-watch documentaries about science and society. Being a travel freak, he's very adventurous and fun-loving.
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