Current market volatility and turbulent demand patterns call for some ‘padding’ in your inventory in order to satisfy unexpected spikes in demand or issues with supply.
A fine balance needs to be struck though – too much excess stock ties up your working capital; too little hurts your service levels and, ultimately, your sales.
There are multiple elements to the challenge at the moment:
- Your own supply chain is likely to be unpredictable. Products may have longer (and uncertain) lead times; production facilities may face new restrictions; and logistics channels may be constrained.
- Stock sourced from overseas is likely to be more difficult to predict again.
- Your ‘A’ items must be available at all times.
- Customer demand is erratic and hard to glean patterns from.
Consumer behaviour is shifting, with lasting changes looking set to have an impact on buying behaviour and brand loyalty.
Rise to the challenge
Optimize for the most important factors. Don’t focus solely on 100% availability across your ‘A’ items, create a wider model that fits your needs. Optimize for a combination of factors including margin, customers, service levels and lead times.
Availability where it matters. Transparency and communication are required across the supply chain in order to achieve the right stock in the right place at the right time for all your customers as efficiently as possible.
Optimize safety stock. All products are not created equal. There is no single, fixed, linear equation which can be applied to determine the appropriate levels across your stock range. Optimize for the realities of each product and avoid a static approach – these factors are constantly changing and therefore so should your safety stock levels. Work towards the unique combination of volatility in demand, lead times, supplier reliability and target service levels across every SKU in your supply plans.
Upgrade your models
All of your decisions start with inventory forecasting. At the moment, the process is a minefield and patterns are changing fast and appearing without precedent. Multiple methodologies need to be constantly evaluated and incorporated into a forecast model that fits the complex supply chain planning requirements outlined above.
As you have discovered, your ERP system isn’t equipped to handle the model you need – you’re likely using spreadsheets. Excel is great when working in a single dimension, but spreadsheets struggle with multiple views and when developed in-house they can end up full of errors.
Your buying and logistics decision makers have enough to keep them busy right now. They need actionable insight on tap, rather than data that needs to be mined for information. With the current pace of change, agility and speed of decisions is key.
Getting to this stage is neither difficult nor out of reach. With AGR Wholesale Dynamics, you can manage your supply chain in a logical, consistent way with S&OP software that functions as an add-on to your existing ERP system. Keep on top of volatility and equip your team with the tools they need to take control. Let us show you the impact that the AGR software can have upon your agility as a business – get in touch today to see just how much of a difference it could be making to your market position.
