Often overlooked or underestimated, well-managed product inventory can be a marketplace differentiator — especially when product is manufactured in one country and sold in another.
An efficient, seamless supply chain can maximize the coordination between production and sales. The most successful manufacturers are those who can predict demand within limited tolerances, appropriate inventory according to the customer’s needs, and coordinate customer service and logistics to the point of sale. In addition, they often have a strong third-party logistics partner to help make it all possible.
The supply chain is critical to enhancing and amplifying cash flow, and proper inventory management is crucial to the overall health of any company that produces goods for public consumption. Many factors contribute to the success or failure of a supply chain. Outlined below are some key areas to consider when evaluating and improving an inventory-management system and, ultimately, boosting supply-chain efficiency.
Demand planning and forecasting (predictive analytics). Accurately forecasting consumer demand can be a difficult task. Robust data analytics, such as market studies and research, detailed historical buying patterns and trends, and a statistically generated forecast, can help enhance the process. The foundation for the success of any forecast is credible input, knowledge and communication of expectations from your customers. The statistical forecast must be flexible enough to allow for continuous updates based on marketplace or manufacturer’s needs. There must be a strong link between sales, customer service, inventory management and supply-chain management, to communicate and accommodate those changes when necessary.
Inventory safety stock. Competing organizational demands often occur between the need to minimize inventory and provide maximum flexibility in case of unknown or unpredictable customer demand. Safety stock acts as a buffer between these priorities, while providing a cushion for uncertainty. Data analytics serve to enhance and assess required safety stock levels, based on the time necessary for the supply chain to react to changing dynamics.
Inventory lead time. The supply chain is the key driver in reducing the time to convert manufacturing to inventory. You must know the status of your product — in production, in-transit and arrived — with certainty, in order to meet the time requirements of your customer. This information is also important in assessing and deriving the proper level of safety stock.
Communication and coordination. Simple organizational execution can be derailed in companies that lack the ability to effectively communicate and coordinate throughout the product-to-cash conversion. One function might have an understanding of the market or specific customer need. Another might have data analytics to forecast or plan production. Yet another might have the skills to move the product. Often these functions operate independently of one another. The most successful organizations are masterful at this basic organizational execution. They possess the ability to predict, identify, react and execute across multiple corporate disciplines. Merely having the right information, correct knowledge and data can’t overcome poor communication and coordination.
Robust demand planning and forecasting, reducing lead times, maintaining proper safety stock levels and communicating and coordinating are the foundation of an effort that results in reduced cost, improved profitability, enhanced cash flow and, most importantly, a satisfied consumer. Make efficient inventory and supply-chain management a differentiator with your customers and in the marketplace. Growth in sales, and gains in market share, are sure to follow.
Jamie Overley is CEO of East Coast Warehouse & Distribution, a provider of temperature-controlled logistics services to food and beverage importers.