Companies are turning to inventory management principles for help navigating supply chain disruptions.Inventory management isn’t the same as supply chain management. But both are vital to the success of modern, competitive companies of all sizes.If your goal is a smooth supply chain, start by honing your inventory management processes.Inventory management is one aspect of supply chain management, and though the terms are often used interchangeably, they refer to different concepts. To thoroughly understand the difference between inventory management and supply chain management, you must first examine and grasp the full scope of managing the supply chain.
For a business, a supply chain follows a product from the sourcing of raw materials to the delivery of the item to the end user. Consequently, supply chain management contains many different parts and elements, such as the logistics involved in transporting materials and products from point A to point B.
You can consider inventory management a subset of a greater supply chain network. Managing your inventory involves ordering, storing, and distributing products. When it is handled well, inventory management can have significant benefits for businesses. Conversely, poor inventory management decisions like over- or under-ordering can be not only expensive, but also devastating for the long-term health of a company. If a business doesn’t invest in understanding and implementing inventory management best practices, it will almost certainly experience far more supply chain disruptions. And in the current climate, the last thing any organization wants to experience is an uptick in supply chain issues and the resulting challenges.
Inventory Management Techniques to Overcome Supply Chain Problems
Currently, there are three major issues that have contributed to supply chain headaches. The one getting the most press is the global supply chain crisis related to the COVID-19 pandemic. Safety restrictions, labor shortages, and shutdowns have impacted suppliers along the chain worldwide. Some of these supply chains have experienced only temporary hiccups whereas others have yet
to bounce back from disruption and return to normalcy.
The second supply chain challenge involves Europe and the U.K. Brexit and other international business decisions have slowed down some supply chains. At the same time, these disruptions have made other supply chains more expensive.
The final stumbling block in the way of a smoother supply chain is the challenge of trying to meet environmental needs like emissions goals. This is still a puzzle for which companies around the world are seeking solutions.
However, the good news is that you and your company can overcome each of these supply chain disruptions by implementing a few proven, modern inventory management strategies:
1. Adopt automation, artificial intelligence, and machine learning.
Automation is an exceptional tool for streamlining inventory management. For example, warehouse automation can create efficiency by using cloud-based systems to direct robots in finding or delivering goods. This eliminates the need for people to track down and package items. Essentially, these robots can serve as assistants to human employees and help improve the overall speed of workflows throughout a business.
Automation software driven by AI and ML can also serve a secondary purpose in alleviating supply chain issues. The software can collect and parse data to make the supply chain more transparent as a whole.
2. Embrace emerging inventory control applications.
The more control you have over your inventory, the less disruption and stress you and your company will feel as a result of the larger supply chain. Achieving the necessary level of inventory control isn’t necessarily easy, but many companies are adopting inventory control methods, like the ABC analysis, to smooth out the process.
In an ABC analysis, all products are labeled as A, B, or C. A-level products have the highest demand or value. In contrast, C-level products sell slowly, resulting in infrequent counts. And B- level products fit somewhere in between.
Once products have been classified this way, inventory and supply chain managers can more efficiently determine whether to order replacement stock.
3. Use passive and active demand forecasting.
Knowing how much of a product to have on hand each quarter makes financial and logistical sense. Demand forecasting predicting the demand for a particular product can be difficult, which is why many people break it up into passive and active demand forecasting measures.
Active demand forecasting involves looking closely at what’s happening in the marketplace. It’s part intuition, part trend data, and part historical data (if historical data is available). Startup businesses tend to rely on active demand forecasting for guidance because they have little legacy data to examine. Passive demand forecasting leverages historical trends to predict future needs.
Companies can use either passive or active demand forecasting, or they may prefer a combination of the two.
4. Employ inventory and warehouse management software.
Walk into any organization with control over its inventory and successful supply chain management practices, and you’ll likely see a lot of technology. Warehouse management software has been a game-changer for ironing out the wrinkles of inventory management.
Most warehouse management systems capture large pools of data. They also show at a glance what’s occurring not only in the warehouse, but also at all points of the supply chain. This makes them invaluable in helping identify potential pain points and supply chain disruptions.
Warehouse management solutions have other advantages, too. Many integrate seamlessly with companies’ other systems, like customer relationship management software. That means when a
customer support representative answers a phone call, the representative can use warehouse management information to provide exceptional service.
Outmaneuvering every supply chain interference is impossible, especially when it comes to uncontrollable events like a global pandemic. Still, inventory management best practices and tools can take the sting out of disruptions. What could be better for companies that want to compete and grow?
About Burak Ciflikli
Burak Ciflikli is the COO of Jotform, a popular online form builder that’s on a mission to make organizations more productive and people’s lives easier. This all-in-one data-collection solution is perfect for gathering, organizing, and analyzing important business information. With more than 15 million users worldwide, Jotform is a trusted global brand that’s growing every day.
