During the early days of the COVID-19 pandemic, stockouts were the norm as overseas shipments halted, retailers ran out of goods, and manufacturers ran out of materials. Skip to 2021, and businesses were trying to find the balance between Just-in-Time and Just-in-Case methodologies. Another year beyond that, companies struggled to optimize bloated inventory levels resulting from high levels of safety stock. Here in 2023, much effort is being spent on purging unsaleable inventory in favor of more valuable goods.
Pre-pandemic inventory priorities centered on last-minute restocking and high stock turnover. With COVID-19 largely in the rearview mirror, however, the truth is that the new best practices for inventory management are still being defined.
Inventory Management: Lessons Learned
A process once streamlined down to the last SKU has become messier. New inventory management best practices are not yet set in stone and may never be again. Optimized inventory management has become a moving target as political instability, wars, natural disasters, and black swan events threaten constant supply chain disruption on a global scale moving forward.
Despite these continuous risks, here are some lessons supply chain professionals have learned that can help you to develop an optimal inventory methodology for your business:
- Store the right safety stock. Given the inventory purging happening across industries, it’s easy to think that safety stock has gone out of vogue. Leading into the 2023 peak season, however, that’s not quite the case. Retailers and manufacturers haven’t given up on safety stock, instead reserving that space for high-value or long-lead-time items and materials to ensure higher storage costs are worth it and the inventory will turn over.
- Manual processes are dying. Given the visibility and agility required in today’s market to keep inventory reliably moving, it’s becoming more difficult to manage the flow of goods using paper-based processes and spreadsheets. From warehouse management systems and enterprise resource planning software to fully developed control towers, businesses of all sizes have found that they need at least some level of enterprise technology in logistics and procurement. Many businesses have also addressed the ongoing labor shortage through automation, robotics, and artificial intelligence, which ultimately help augment employees’ capabilities and allow businesses to do more even when understaffed.
- Diversification is king. Businesses that lack redundancy in their supplier base learned during the pandemic that relying on a single source poses too much risk. To keep inventory flowing steadily from the source to the end customer, businesses need to diversify the various links in the supply chain so they can shift demand when needed.
- Keep operations flexible. The pandemic taught us that rigid processes carry significant risks. To remain resilient, businesses must build agility and visibility into every aspect of the supply chain. Industry leaders have responded in numerous ways, such as leaning into partnerships to close procurement and logistics gaps.
Perhaps the greatest best practice for inventory management in 2023 is to remember that everything is in flux and will remain in flux for the foreseeable future. Businesses that give themselves the ability to adapt to disruptions and changes in real time will be best positioned to succeed at inventory management. A strong partnership with a third-party logistics (3PL) company can help your organization gain the flexibility and agility required to keep pace in today’s market.