2 Inventory Management Trends to Watch in 2021
It isn’t hyperbole to say that 2020 hasn’t been a normal year. Along with every other business, distributors have been ...Read Post
It isn’t hyperbole to say that 2020 hasn’t been a normal year. Along with every other business, distributors have been forced to adjust the way they do business to meet the demands of an uncertain supply chain, lowered labor availability, and increased reliance on technology for meetings, sales, and customer service.
But with disruption comes the opportunity to implement positive changes that can help distributors service their customers better, fulfill orders more quickly, prevent backorders, grow existing-customer revenues and increase profits. It’s a good time for distributors to take stock and rethink old ways of managing inventory and consider new trends and methods to keep their customers satisfied and attract new business.
According to a survey of 200 global manufacturers by Bain & Company and the Digital Supply Chain Institute, the top five supply chain priorities for companies over the next three years are reducing cost, increasing flexibility, boosting resilience, embedding digital technology, and protecting business continuity.
There are two key inventory management trends emerging in response to these priorities:
Customers want to order when and where they want, and that trend only accelerated this year. As a result of this past year’s business disruption, many distributors are building a more resilient fulfillment network that provides speed, flexibility and innovation. The following are some ways distributors are responding to this trend and strengthening their ability to serve customers more quickly and efficiently.
Microsoft partnered with Bain & Company to study the impact of COVID-19 on supply chain plans and priorities at 70 companies. The study found that the goal of 56% of respondents plan on increasing their investments in demand forecasting and predictive planning in 2021.
Demand planning is, especially now, a critical part of supply chain management and using intelligent apps, like eTurns Precise Demand Planning Solution and the eTurns TrackStock Min/Max Tuning analytics, can help you incorporate data on actual usage into decision making. Modern demand planners are focused on customer needs and usage, rather than simply stocking products on shelves “just in case.” This means distributors can better respond to customers’ growing expectations for a quick and accurate delivery.
With an unpredictable supply chain, powerful predictive and demand planning capabilities can also help distributors weather disruption. The right solutions can provide distributors better visibility into potential bottlenecks and mitigate the effects of disruption.
Distributors can leverage the actual customer usage data collected in TrackStock to optimize their own distribution centers, reducing their annual carrying costs and improving customer service at the same time.
Collecting usage data for a distributors’ Very Important Customers (VICs), which comprise typically no more than 20% of their customers but 80% of their revenue, provides:
All the distributor would need to calculate those valuable data points are a few critical metrics by item, tracked at the point-of-use.
In addition, tuned mins/maxes allow a distributor’s customer to take cash out of inventory and eliminate stockouts. Aggregating the product usage data combined with each customer’s on-hand inventories and Minimums and Maximums across the distributor’s Very Important Customers allows TrackStock to calculate precisely which products will be ordered in what quantity on what date. This removes the forecast error from traditional demand planning software tools.
Distributors can elevate relationships with their top customers by using consignment inventory at the customer site. When distributors stock and manage inventory at a customer’s site, the distributor becomes an inventory lifeline for the customer in uncertain times. The benefit for customers is that they have stock available when needed, only paying for the inventory once it is sold or used.
Distributors gain from this strategy, as well. When the supply chain is no longer dependable, and cash tight, having customers reliably supplied with a stash of inventory on-hand can make distributors heroes. And having a sophisticated cloud technology to manage consignment inventory, like eTurns TrackStock, provides real-time visibility of inventory at the point-of-use and automates replenishment, leading to greater efficiencies and lower costs.
With today’s shaky supply chain, the more distributors can do to ensure timely delivery and service, the better. Distributors with delivery vans that can reliably have critical product to an OEM the same day will be called first. Having a knowledgeable technician in a fully equipped service truck that can go to the customer site and conduct any maintenance or repairs on critical parts puts the distributor at an advantage when the customer thinks about purchasing a part.
The price from the distributor may be a bit more than purchasing it from another source, but knowing that a knowledgeable service team comes with it lends trust and security in the partnership.
Inventory-sharing solutions are a growing trend that has allowed distributors to leverage other companies’ inventories via “inventory pooling.” Formalized inventory-sharing solutions allow peer distributors to easily browse each other’s inventories. In the Industrial Distribution article, “How Inventory-Sharing Can Help When Business is Down,” Kathleen Tomalonis of WarehouseTWO outlines how the ability of wholesalers to be able to source inventory from each other can help their business during challenging times.
Using an inventory solution is another tool in a distributor’s arsenal to serve customers more effectively and efficiently. If a distributor is unable to source a critically needed part for a top-tier customer from the manufacturer in a timely manner, inventory-sharing services can help them fulfill critical orders and backorders faster, which puts them in better standing with their customers, reduces inventory and increases cash flow.
A report by real estate investment trust company Prologis, “Automation and Logistics Real Estate #1: The State of Automation in Supply Chains,” highlights three trends that are driving higher levels of automation:
Automation will improve typical warehouse operations: receiving, put-away, storage, picking, packing, loading and shipping. Prologis experts state that “to define and segment automation technologies from other types of equipment the key differentiator is autonomy from human control.”
Prologis groups these automation technologies into two categories:
Companies are also increasing their investments in software that streamlines inventory management and replenishment. A survey by DC Velocity/ARC Advisory Group showed that the highest-priority technology investment remains Warehouse Management Systems, at 36% of respondents and 96% (prior to the onset of COVID-19) said they expected the warehouse automation value proposition to increase over the next three years.
Automated inventory replenishment is also in demand. With an automated inventory replenishment solution like eTurns TrackStock Manage App, distributors can build loyalty and boost existing-customer revenue by as much as 30%. Whether the inventory is in stockrooms, service trucks or mobile carts, the software automates replenishment using phones, PDAs, RFID or IoT weight sensors and tracks consumption, as well as consigned inventories.
eTurns TrackStock eVMI puts IoT weight sensors under bins of supplies that work together with cloud software for fully automated replenishment. The software converts bin weights to quantity to allow complete physical inventory counts multiple times a day without human intervention, a great benefit for inventorying small parts and reducing employee exposure in the time of COVID-19. This allows a distributor’s staff to do more selling and less accounting for product and the customer benefits by reducing their carrying costs in overstocked inventory.
By leveraging trends in inventory management, distributors can position their companies to weather disruption, keep and cultivate sales with their top customers, expand sales territories, and keep ahead of the competition.