Is Your Inventory Management System Dynamic Enough for the COVID Era?
By Chris Inglett, Business Development Manager, Absolute Value
Dealing with the coronavirus pandemic and its aftermath has resulted in some unique changes in supply chain management. Typically, the most successful companies quickly adapt to industry and marketplace changes, and this has held true for how they forecast and manage their inventory in this pandemic/post-pandemic environment as well. A common denominator among those companies is often how well their demand planning and replenishment system can dynamically adjust to the unprecedented changes.
First-come, first-servedThe pandemic has certainly had dramatic effects on product demand around the world. Some products, such as gasoline and clothing, have seen decreases in demand, while demand for products related to home construction and remodeling have seen massive increases. In many cases, these unusual spikes in demand have made supplies scarce, leaving some distributors and suppliers unable to take full advantage of the situation.
Some suppliers have reacted to such shortages by filling orders on a first-come, first-served basis. In this scenario, the buyers who can react the quickest will get the most product. This underscores the critical importance of having a dynamic forecasting and replenishment system that can constantly update any changes in both your inventory and consumer demand. The buyers not only need to be able to issue large purchase orders quickly, but they need a system that produces an accurate portrayal of what inventory will be needed much further in advance than their normal buying cycle.
Down a warehouseAnother effect of the coronavirus is that some companies have had to shut down one or more of their warehouses/distribution centers. Warehouses are closing not only due to a reduction in consumer demand, but also because of direct outbreaks of the virus itself, compounding the effects. Both cases present very different problems, and a company’s inventory management solution will need to address them in different ways.
For example, if a warehouse temporarily closes due to a decline in demand, the company could benefit from utilizing an inventory management solution with solid inventory balancing functionality. This would allow the company’s remaining open warehouses to transfer what is needed from the closed location’s inventory, and minimize any product loss due to things like shelf life or product becoming obsolete.
However, if a location closes as the result of a virus outbreak and transferring inventory out is not an option, then the organization would benefit more from the aid of a usage redirect tool. Redirecting the usage from the affected warehouse as quickly as possible will minimize any potential lost sales.
If you’d like to learn more about how Absolute Value Demand Planning can help with your company’s inventory management during the pandemic era, let us know.
Review differentlyOften times inventory managers and purchasing departments make a practice of reviewing suggested orders for a vendor on a schedule, say every two weeks. Then, as can sometimes occur, there is an item stock out. To prevent this from happening, one common stop-gap measure is to add some safety stock days of inventory.
Perhaps a better scenario is to use an inventory management system that processes suggested orders every night and keeps an associated vendor buying calendar, which, on a daily basis, indicates the number of items that are critical on suggested orders. That way, the inventory manager doesn’t have to look through thousands of suggested orders each day. In this scenario, the user can see at a glance which items are showing up as critical and need to be looked at for a longer period of time to be sure enough stock is being purchased.
The pandemic has caused many changes to our world and the way we view it, and supply chain management is no exception. The companies that can adapt to the new landscape of their given industry the quickest and most efficiently, will not only survive this time, but even have a chance to thrive.
You can read about how Koch Air handled some of these and other inventory management scenarios with Absolute Value’s Demand Planning software here.
If you’d like to learn how Demand Planning can optimize your inventory investment, let us know!