Inventory management in 2022 is a tale of feast or famine, the haves and have-nots.
On one hand, we’re seeing shippers burst at the seams with inventory. Far past a comfortable capacity (about 85%, per industry standards), these shippers are faced with serious efficiency roadblocks. Overcrowded warehouses mean inefficient labor in an already challenging labor market. As inventory bleeds into overflow warehouse space as needed, these shippers are forced to pay rent in two locations and incur the costs of transporting inventory back and forth, plus deal with the operational headache of managing products in two places.
On the other hand, there are shippers grappling with half-empty warehouses as they struggle to obtain raw materials to make their products. These shippers are not only burning money on unused warehouse space, but also facing a serious customer service issue. If they have products to dole out at all, many shippers with scarce inventory are forced to ration products to customers and only fulfill a portion of their orders. For customers like Walmart, Target, etc., this can result in hefty fines for shippers. On the consumer side, this causes frustration and can damage brand reputation.
This dichotomy defining inventory management today is caused by several overlapping variables: the labor shortage, pandemic, clogged ports, raw materials shortage, etc. For shippers on either end of the spectrum, there is no one easy answer. However, mastering inventory management with a strong strategy can help shippers avoid additional costs and customer frustration.
Lean Warehousing Principles
Lean warehousing is the operational state of nirvana we’re all striving towards. As a key foundational strategy, lean warehousing focuses on eliminating waste in all its forms, touching products as little as possible, and driving efficiency.
Needless to say, it’s easier said than done, and external circumstances often make it difficult for shippers to achieve the optimal lean warehouse.
Shippers are continuously trying to determine the right amount of safety stock to keep on hand, and the pendulum will always swing back and forth between just-in-time and just-in-case inventory strategies. A lot depends on the current market and the shipper’s specific needs. No matter the strategy shippers are currently adopting, strong inventory management is about creating a foundation of stability so they can be agile amidst change.
Tips for Better Inventory Management:
Having a clear inventory management strategy, and then managing in alignment with that strategy, is the most important thing shippers can do to maintain control in today’s volatile market. Below are five considerations for better inventory management that we’ve found most useful for our customers:
Trends Towards the Future
The last two years have been fraught with risk and disruption, and shippers are on the hunt to future-proof their supply chains to avoid repeating past mistakes.
Many of today’s inventory struggles are rooted in the inability for shippers to find enough workers amid a labor shortage. As such, the market is trending towards innovative technology that augments human labor and keeps supply chains agile: automation, robotics, and advanced analytics. The pendulum will always swing back and forth between more or less safety stock, but investing in strong technology now can help provide the stability that the supply chain needs.
To speak to an expert or learn more about building stronger inventory management, visit Kenco’s Supply Chain Consulting page.