Companies are struggling to maintain the right inventory. Pandemic-era supply chain disruptions and volatile consumer demand led many companies to shore up inventory in 2021, while soaring container prices ate away at their bottom lines. Now, with a potential recession looming, many organizations are overstocked and still struggling to manage supply chains that have become increasingly complex. Case in point: In 2022, days of product inventory average 33 days higher than during the onset of the 2007 recession.
Yet even in the face of supply chain volatility, the vast majority (88%) of companies don’t actively model the form and function of their inventories. Appropriate inventory is a critical buffer against marketplace uncertainty and supply variability, and organizations need dynamic inventory strategies to stay competitive and reduce manufacturing waste.
Intelligent planning offers the solution. It allows supply chain teams to take a proactive approach to inventory management through data-driven decisions centered on consumer demand. As a result, organizations can better weather market disruptions and access alternative supply when needed.
Intelligent planning tools also allow supply chain, logistics and finance teams to support long-term business goals like sustainability and profitability, all while prioritizing a customer-centric fulfillment strategy.
The Root Causes of Inventory Challenges
Supply chains today are more global and complex. As organizations work to balance cost effectiveness, operational efficiency and sustainability, supply chain strategies have increasingly featured blended sourcing — also known as rightshoring — and a high level of in-transit inventory. And that was before COVID-19 introduced new complications like volatile consumer demand, sourcing bottlenecks and port congestion, all of which made it more difficult to fulfill orders and deliver customer-centric retail experiences.
Supply chain strategy and other business goals must be synchronized to weather procurement hurdles and inventory strains. Yet but many organizations lack critical alignment between finance and supply chain teams. In particular, organizations often struggle to agree on key performance indicators (KPIs) for supply chain functions.
While finance teams largely focus on cost mitigation and the impact on return on invested capital, supply chain teams are primarily concerned with increasing flow by identifying supply chain bottlenecks, overcoming capacity restraints and bolstering customer service. This disparity makes it difficult to clarify supply chain goals and implement digital tools for improved network performance.
With organizations ramping up to meet intensifying net-zero emissions and waste-reduction targets, organizational silos make it nearly impossible to incorporate sustainable alternatives into inventory and supply chain processes. To successfully navigate inventory pressures and reach larger business objectives, organizations must ensure cross-team alignment on what supply chain success looks like. Dynamic, data-driven intelligent planning tools can help clarify and visualize supply chain goals, ultimately enabling a holistic and highly collaborative supply chain strategy.
Three Tips for Managing Inventory
Successful inventory management is a key driver of supply chain success and increased customer satisfaction. It’s also central to effective waste-management and eco-conscious sourcing networks, both of which play critical roles in sustainable supply chain operations.
As you integrate intelligent planning tools into your inventory management strategy, here are three tips to keep in mind.
Global disruptions and sourcing bottlenecks will continue to jeopardize effective inventory allocation, but you can ensure a nimble supply chain with data-informed tools. By relying on dynamic intelligent planning systems, you can keep customer needs at the center of your fulfillment operations and boost progress toward overarching business initiatives. Intelligent planning enables an agile response to supply chain hurdles — protecting profitability and bolstering competitiveness in a crowded consumer market.
David Food is head of supply chain at Board International.
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