Many inventory-based businesses have seen their priorities change in recent years. Prior to the pandemic, keeping the “right” inventory on hand meant keeping overall inventory as low as possible while still meeting consumer demand. In most cases, business owners felt confident in the overall supply chain and its ability to deliver the inventory they needed, when they needed it.
Unfortunately, the pandemic threw many of those usual strategies into chaos. Customer demand changed abruptly, and supply chain challenges, including truck driver shortages, became a much more severe problem across industries. Inventory-based businesses must, therefore, navigate those fluctuating inventory priorities more effectively.
Factors Influencing Your Inventory Needs
In many cases, you may find that the factors that influence your inventory needs are outside your control.
Consumer Demand
One of the biggest challenges in predicting your inventory needs is fluctuating consumer demand. While you can forecast demand in some instances, including seasonal demands, you may find it much more difficult to predict consumer trends. Often, trends will emerge unexpectedly. You may, for example, have a tough time predicting a sudden increase in product need, or determining what could lead to consumers unexpectedly turning on a specific product.
Material and Supply Shortages
Unfortunately, it can prove difficult to predict potential material shortages. Take, for example, the chip shortage that plagued electronics and vehicle manufacturers throughout the pandemic, making it very difficult to keep up with construction demands. Raw material shortages can prove difficult for many businesses to push through.
Supply Chain Challenges
Supply chain challenges have led to considerable production delays and other challenges over the past several years. One challenge: inadequate truck driver availability. Other delays, including shipping holds and weather emergencies, can also interfere with inventory needs. Many businesses have found themselves dealing with more supply chain issues than ever.
Storage Concerns
Many businesses reacted to supply chain challenges by increasing the inventory they keep on hand of essential items. Unfortunately, businesses without adequate storage space, or without a system in place for managing that inventory effectively, may find it difficult to maintain those supply levels. Furthermore, many businesses may end up struggling to rotate inventory effectively.
Navigating Fluctuating Inventory Priorities
As your inventory priorities change, it’s critical that you have the right systems in place to manage those concerns effectively and deal with any issues you might face along the way.
1. Invest in an Inventory Management System
An effective inventory management system can offer a number of solutions that can help you avoid some of the challenges associated with navigating those shifting inventory priorities. Your inventory management system can help:
- Improve inventory forecasting so that you can keep adequate inventory on hand without overstocking
- Automate your ordering so that you don’t run out of vital items
- Provide more visibility into the inventory you already have on hand
- Improve your inventory rotation system
With an effective inventory management system, you can do a better job of keeping up with both your available inventory and your future inventory needs.
2. Improve Demand Forecasting Capability
There are a lot of factors that can go into effective demand forecasting. Some of those factors are observable and within your control. For example, you might know that demand of a specific item increases substantially during specific seasons, or that you will need to keep more inventory on hand during the holiday season.
You might also discover that, with an effective system in place, you can better track product lifecycles: how much purchases of a specific item are likely to increase over time and when they are starting to decline. As a result, you’ll get a better feel for when you may be ready to stop stocking certain items, or when overall demand may decrease.
Collect data about the trends in your inventory needs, including when customers are likely to make more purchases and what items customers are most likely to stock up on. Use a demand forecasting system that will allow you to keep up with those changes in demand as effectively as possible.
3. Improve Sourcing
In many cases, you may find that an improved sourcing strategy can have a significant impact on your ability to manage changing inventory priorities. Modern businesses must be prepared to address supply chain disruptions and common challenges. Having multiple sources for the materials or goods you need can help keep your business moving smoothly and your customers satisfied even when you encounter unexpected supply chain challenges. That may include:
- Onshore and offshore sourcing
- Avoiding lean or “just in time” inventory management
- Diversifying manufacturing solutions
- Working with multiple shipping providers
By setting up a diverse sourcing strategy, many businesses find that they are better positioned to manage potential inventory challenges and deliver on consumer expectations.
4. Focus on Continuity
Today’s businesses can no longer rely on inventory management systems that attempt to maintain the lowest possible inventory to satisfy demand. Instead, businesses need to focus on supply continuity: their ability to continue to provide reasonable inventory to meet consumers’ needs, even during periods of disruption. That overall focus on continuity may mean keeping more inventory on hand.
5. Improve Insights into the Supply Chain
If you do not have consistent supply chain visibility, you may find it difficult to keep up with changing inventory needs. Overall visibility is critical to your ability to predict potential problems, adapt, and ensure that you continue to provide the high level of service your consumers expect. A supply chain management solution that offers that critical visibility, provides real-time alerts, and offers more information about alternative solutions can help.
Inventory needs and priorities have shifted immensely in the wake of the pandemic. In many cases, those demands are likely to continue to shift in the near future. By utilizing the right supply chain management solution, however, you can get a better feel for what your inventory needs really are and how they have changed. Contact us today to learn more about how Stock IQ can provide those essential insights.
