Mastering Inventory Management With Key Strategies to Streamline Your Supply Chain

In recent years, delays and disruptions in the global supply chain have wreaked havoc on product lead times and threatened total paralysis for industries. Bottlenecks due to global conflict, shipping container shortages, never-before-seen port congestion, lack of infrastructure, and limited transport capacity and skilled labor are just a few examples of the chaotic economic environment that businesses have had to navigate — and continue to have to do so today.

So what can your business do in response? The first is investing in technology that will make your operations more efficient. For example, by utilizing modern inventory management software, businesses can benefit immensely from simple improvements that can squeeze out efficiencies along the entire retail supply chain.

Here are a few tips that direct-to-consumer (DTC) brands can utilize to combat supply chain disruptions:

1. Improve visibility across the retail supply chain.

One of the most critical improvements that businesses can make is optimizing inventory visibility. In a supply network where product fulfillment data can come from multiple channels, modern inventory management software can use aggregation to expose the full availability of inventory across the entire network.

This helps to minimize stock-outs and order cancellations, satisfy service-level agreements (SLAs), and create a better fulfillment experience for the customer.

Perhaps the most important functionality that businesses lack is the syncing of inventory across sales channels and locations. Without a real-time, 360-degree view of inventory availability, it becomes increasingly difficult to track inventory across a vast network, let alone use OFL to route products to optimal locations for streamlined fulfillment.

The good news is that syncing inventory does more than just improve visibility. It also allows businesses to manage accurate buffer inventory levels (i.e., the excess inventory reserves to protect against unforeseen circumstances), optimize available-to-promise (ATP) inventory (i.e., the projected amount of inventory a business has in stock, ready to sell and not allocated for existing customer orders), view stock that is available in-transit, and view inventory positions by various channels or warehouses.

Precise, real-time data can help businesses increase inventory turns and reduce markdowns, and allow them to support multi/omnichannel models, including buy online, pick up in-store (BOPIS); ship-to-store; and store fulfillment (as mini distribution centers).

Syncing inventory to product detail pages (PDPs) on an e-commerce storefront can also inform shoppers about the exact amount of ATP stock they’re looking to purchase.

2. Forecast — and plan for — demand using pre-ordering and backordering mechanisms.

Demand forecasting uses predictive analysis to understand and predict customer demand and future sales by using historical sales data, trends and known upcoming events to make informed decisions.

Types of products, geography, seasonality and competition can all influence consumer demand, which is why businesses often use agile demand forecasting models to plan inventory and warehousing needs as well as to respond quickly to unforeseen circumstances.

However, forecasting is only as good as the data that it’s given. This is why modern order management system (OMS) applications offer pre-order and backorder mechanisms to get a better sense of the amount of inventory that’s required to meet customer expectations. Typically, a modern OMS application can aggregate the future demand of products with pre-order and backorder capabilities, and send that data to a demand planning system to forecast demand and plan future inventory requirements.

3. Lean on inventory control applications.

A subset of inventory management is inventory control, or stock control. Inventory control ensures the optimal amount of supplies within a business. It also seeks to maximize profit while minimizing the total cost of inventory, while still providing customers with products in a timely and efficient way.

Modern inventory management software is often equipped with inventory control systems, making it easier for retailers to optimize stock levels and extend the data model to fit business needs.

A well-functioning inventory control system should allow companies to categorize inventory by attributes, locate items, pool inventory, and control the availability of stock to sell in each channel, market or region.

It should also allow them to set accurate and specific reorder points to replenish stock when needed. Companies can use software to plan for sales and stock-outs and prevent the buildup of dead stock (i.e., unsold inventory) that sits in storage and is not expected to be sold in the near future.

Conclusion

Supply chain interruptions are going to continue to impact retailers now and in the future. In fact, research and benchmarking group APQC reported upcoming trends in big data, advanced analytics, supply chain digitization, data management and process standardization are all poised to have a major impact on supply chains moving forward. And recent international disruptions (e.g., the Red Sea shipping crisis from February) and national disruptions (e.g., the Baltimore port crisis in March) prove just how fragile the supply chain is as a whole and how important it is to improve retail logistics operations before the next major problem arises.

Devon Cox is vice president of product engineering at fabric, the creators of the next-generation commerce platform.