Various factors are reshaping the supply chain processes like cyberattacks, changing consumer demands, raw material storage, shipping price change, and port congestion. The moving forward steps are technological transformation, revamped inventory management strategies, and IM control. Today, we’ll discuss supply inventory management; managing effective SIM, its benefits, and key challenges.
What is Supply Inventory Management?
The SC process comprises of series of activities ranging from raw supplies to the production facility, and delivering the final product to the end consumers. Inventory management is one of the key areas of SCM and it deals with managing and controlling the flow and movement of products and goods in and out of the warehouse and the distribution centers.
However, the IM process comprises analyzing the existing stock level in every warehouse and predicting the future demand for goods and products to decrease any amount that is unnecessary or surplus. In short, it comprises of following;
- Making sure the availability of goods across the SC network
- Production and manufacturing unit
- Retail point of sale
Supply inventory management comprises merchandise, finished goods, goods-in-process, and raw material. Businesses and companies should have the capability to adjust their inventory to meet the demands of customers while facing disruptions.
It means that you should make sure the product is delivered after delay, not understock, or overstock; regardless of any type of disruptions like natural disasters, cyberattacks, and others. That’s where the role of supply inventory comes into play.
Various IM strategies would help you to decrease the impact of SC disruptions and make sure continuous business improvements. Some of them are as follows;
- Safe stock strategy
- EOQ (economic order quality) model
- FIFO (first-in and first-out)
- JIC (just in case)
Managing Effective Supply IM – Strategies
Some of the main strategies for managing effective supply inventory management are as follows;
Finding Alternative Supplier
If you have got a list of alternative vendors and suppliers in different geographies, then it would make sure a smooth and uninterrupted supply of goods and materials. It may not seem like an efficient and effective move, but it would help you to decrease the risk factors. Another strategy is to maintain safety or reserve stock to avoid operational delays from getting stopped completely.
For instance, the automobile manufacturing company Volkswagen has got regional suppliers in Europe and China. The company keeps on switching from Chinese to European suppliers in case of a shortage of supplies.
Analyze Suppliers & Sourcing Strategies
According to a survey study, 44% of the participants said that businesses and companies heavily depend on a few suppliers from some particular countries. They would find some new suppliers in the future, probably near ones.
However, many companies analyze their sourcing strategies that focus on achieving greater transparency and local suppliers to establish an SC network that would help you to close and evaluate them. For instance, Schneider Electric has decreased its supplier cost by reducing suppliers from 12000 to 5000; the company plans to collaborate with a few suppliers closely.
According to an estimate, approximately more than 40% of businesses and companies have launched advanced analytical tools and digital tools, and less than a third are employing IoT and cloud technology.
WMS and advance inventory would help companies to track data in real time for accurate forecasting and high visibility. Advanced analytical tools and artificial intelligence help businesses and companies in the following ways;
- Tracking SC transparency and visibility
- Customer order fill rate
- Gross margin
- Inventory turnover
IM tools and software allow you to measure and manage how products flow and move in the warehouse automatically.
The objective of effective SCIM is to make sure the availability of the right goods at the right time in the right place. Isolated organizational data and departments would decrease the visibility that you require for effective SCIM. However, it supports and facilitates the smooth flow of information among various departments.
Benefits of Supply IM
Some of the main benefits of supply IM are as follows;
SCIM allows you to establish a strong and loyal database of customers by making sure that they would timely receive their orders without waiting for them.
Better Cash Flow
If you have got a well-managed IM, then it helps you to invest in such items that sell and leave the rest of them. Resultantly, you have a better cash flow for items.
SCIM allows you to analyze the stock trends and beware of the stock you have in different locations. It helps you to keep limited stock in different locations and pull it back when you have to fulfill orders. However, it allows you to reduce the tied-up cost in the warehouse and inventory on unsold items.
Challenges to Supply IM
Some of the main challenges to the supply IM are as follows;
Warehousing Space Wall
If the particular product or good is difficult to find, then the staff would waste its time in finding it. If you have got an efficient SCIM system, then you can overcome this challenge.
Changing Customer Demand
The needs and tastes of customers keep on changing. If you aren’t tracking and analyzing the trends, then how you would know that their preferences would change?
If you are employing outdated and obsolete practices, then it would reduce the speed of operational processes and cause errors.
Conclusion: Supply Inventory Management
After an in-depth study of supply inventory management; we have realized that SCIM is highly significant for the growth and productivity of your company. If you are learning about supply IM, then you should keep in mind the abovementioned processes, advantages, and disadvantages.
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