Navigate Inventory Challenges and Leverage Demand Visibility for Success
Let’s rewind to 2020 a bit. Let’s skip all the turbulence that the pandemic brought and focus on how the world of business inventories was affected. As per the Council of Supply Chain Management Professionals (CSCMP) ‘State of Logistics’ report, shippers were set on boosting their logistics spending to build resilience in supply chains. The propensity of absorbing higher inventory carrying costs in return for holding more safety stock in warehouses was strong. Hesitation on paying high rentals for high-cost urban fulfillment centers was also cut down due to businesses needing to be near their end customers. The ratio of business logistics costs to GDP fell in 2020 – coming to 7.4%, down from 7.7% in 2019. Total logistics costs dipped by 4% year-over-year to $1.56 trillion, but parcel and last-mile costs rose 24.3%, while airfreight costs jumped by 9%. Overall, inventory carrying costs were down 15% year-over-year due to a 29% drop in financial costs (thanks to lower interest rates).
Now let’s swing to 2023. The pandemic has gone. But the view has changed too. Come to the Logistics Managers’ Index 2023, and we see that growth is rising at a decreasing rate for inventory levels, inventory costs, warehousing utilization, and warehousing prices. The report shows that inventory levels (55.6) continue to grow, though at a decreasing (-6.8) rate. Transportation (71.4) and warehousing capacity (58.2) are on an upward curve.
Get the drift?
If there is anything certain about the world of inventory, it’s this. IT IS UNCERTAIN. Nothing can be tied down to the safe hook of predictability regarding inventory costs, warehouse rents, transport rates, and shipping freight charges. One small change in the world, supply chain, real estate, or geopolitics- and the whole inventory maths gets reshuffled immediately.
As a business, it is a tightrope you walk every day. But the real problem is not that. It is the black glasses that one wears while walking this thin and risky rope of inventory optimization. How can you plan, predict and control sudden spikes and dips in inventory demand without visibility? How can you guard your business against abrupt and expensive inventory shortages when you cannot see how the demand is moving or whether you have enough logistics support- handy? How can a business take control of demand management without adequate demand visibility and requisite real-time demand insights?
The truth is that demand visibility holds the key to smart inventory management. You do it well; you steer clear of sudden cost spikes. You do it with your eyes closed, and you run into pits of unplanned losses.
So let’s get a good peek into all this by going through some key challenges of inventory management and how demand visibility can provide that much-needed relief to businesses.
Common inventory challenges faced by businesses
Managing inventory is a make-or-break stage of any business product cycle. No matter how great the product is, no matter how much in demand that brand is – unless a business is equipped to handle these issues well, it will always find itself on either of the two sides- with too little inventory to satisfy good demand or with too much stock piling up and burning holes in its pockets.
- Inventory shortages and stock-outs – when you do not know where and how much, demand will shoot up.
- Excess inventory and overstocking – when you pay extra warehouse rentals or transport costs or hold rents because you have no clue how much demand can rise.
- Inaccurate demand forecasting – leading to bad judgments about inventory management and inventory planning.
- Supply chain disruptions and delays – Poor demand forecasting that causes aberrations in the logistics chain.
- Inventory carrying costs and financial impact – The rents, transport costs, and other overheads that a business pays because it is not sure about demand movements.
The role of demand visibility in inventory management
Only if you could have some smart demand forecasting tool with you! Then you will not have to second-guess your inventory plans. This is possible, provided you pay attention to the critical edifice of demand visibility. With automated markets, real-time data, and intelligent analytics, demand visibility makes it easy to know when, where, and how demand will move. The ability to map the location, time, and quantity of demand flux can help you greatly optimize inventory levels. This will also strengthen your demand forecasting accuracy by a heavy margin. Thanks to technology, today, it is possible to get strong and precise demand visibility so that you never find yourself in any deer-in-the-headlights moment.
Strategies for navigating inventory challenges
Once you have a smart solution for demand visibility, it is advisable to follow these approaches for getting the best out of those insights.
- Adopting a data-driven approach to inventory management
- Implementing just-in-time (JIT) inventory practices
- Utilizing safety stock and reorder point calculations
- Partnering with suppliers for better supply chain coordination
- Implementing inventory automation and management systems
Doing so will assure you of many benefits of effective inventory management and demand visibility. Like:
- Improved customer satisfaction through reduced stock-outs
- Optimized inventory levels leading to cost savings
- Enhanced supply chain efficiency and reduced lead times
- Increased revenue and profitability
- Better production planning due to a sense of demand patterns
- Better negotiation power with logistics partners
It’s time to start leveraging demand visibility in inventory management. For that, you need to focus on some best practices and prepare the ground well with the following:
- Adequate data
- Rich information repositories
- Structured and accessible data
- Well-integrated processes
- A seamless supply chain structure
- Customer demand patterns and predictions
- Tools for correlation and regression
- Agility in responding to analytics
- Decision-making speed and high responsiveness
Also, start choosing solutions with the advantage and elements of connected architecture, in-built data science capabilities, and a swathe of proven track records in the industry—especially those with the power of AI, RPA, and Data as a Service in their basket.
Demand visibility is as crucial as a compass in the dark forest of inventory management. It’s best to get those glasses on and adopt innovative demand visibility strategies. Robust solutions will help you overcome inventory challenges and succeed in business operations. It will still be a forest. But you will not be barking up the wrong tree. At least not unthinkingly. For more information, talk to our experts.
Recent Posts
Elevate Your Manufacturing Game with Real time Production Monitoring10/10/2023
If you haven’t heard already, here’s what you need to know - data is the new oil. Real-time production monitoring is the refinery that turns raw data into actionable insights. The result? A manufacturing floor transformed into a well-oiled machine, unhindered by bottlenecks and inefficiencies.
Discover the Game-Changing Potential of Predictive Maintenance in Manufacturing10/10/2023
In the ever-evolving manufacturing universe, efficiency and uptime remain the much sought-after constants. The ability to keep machines running smoothly, avoid significant breakdowns, and maximize production output can often be the difference between success and failure. Traditionally, manufacturers have relied on two primary approaches to the maintenance of their machinery – reactive and preventive. Over recent years, another option has emerged as a game-changer and that is ‘Predictive Maintenance’.
How Manufacturing Analytics Can Boost Factory Performance?04/10/2023
If we were to pause for a second and look around our factories and warehouses, we would be surprised to see how much has changed. Manufacturing productivity is increasing, and we need fewer workers for the same results- hence marking an undeniable factory performance improvement.
Unlock the Potential of Modern Manufacturing through IIoT03/10/2023
Henry Ford and Nikola Tesla are proof that whenever something new is thought of- the cliché response is, ‘Why do we need it?’ Slowly but surely, the answer changes to ‘Tell me how.’ From horses to cars, from lamps to electricity, and from dumb machines to intelligent and IIoT-run equipment, the journey always follows the same path
Navigate Inventory Challenges and Leverage Demand Visibility for Success08/08/2023
Let’s rewind to 2020 a bit. Let’s skip all the turbulence that the pandemic brought and focus on how the world of business inventories was affected. As per the Council of Supply Chain Management Professionals (CSCMP) ‘State of Logistics’ report, shippers were set on boosting their logistics spending to build resilience in supply chains.
