5 Essentials of Inventory Optimization in Times of Uncertainty

The pandemic has disrupted businesses in nearly every industry, largely because of the resulting inefficiencies regarding the supply chain. If you want to optimize the supply chain during these largely uncertain times, there are some steps you can take. The following are five key considerations to give you a better idea of how to improve inventory optimization and supply chain management.

1. Risk Management

One essential item to think about is risk management. Without it, your business could suffer dramatically when you least expect it.

You need to be able to forecast potential risks in the supply chain and plan ahead for them. If you can properly analyze and prepare for risks at every step of inventory management, you'll be able to mitigate and manage them. This will help keep your business from struggling due to avoidable risks with the help of a long-term strategy.

2. Safety Stocks

You also need to work with someone with a good understanding of safety stocks in addition to risk management. They need to be able to apply constraint theory and other methodologies to eliminate bottlenecks and improve efficiency.

If something is going to stop your supply chain, you must ensure you have a safety or buffer stock that will keep operations running smoothly. This would enable you to meet customer requirements and maintain a steady revenue stream. 

3. Go Back to Basics

Another step to take is to make a return to the basics and ensure everyone in your organization is on the same page. Oftentimes, businesses rely on their MRP and ERP systems to facilitate operations. However, people aren't actually checking to see how they're performing.

Also, many of those MRPs and ERPs started 20 to 50 years ago, especially for more mature companies that have been around. In the years since, the staff who truly understood how they worked and could measure their performance likely left the company. They may not have passed down their knowledge, either.

This is why it's important to ensure everyone is aware of these systems and knows how to manage the supply chain properly. Employees should be able to determine the right lead times, buffer and safety stocks, and other elements are there to keep the supply chain moving.

4. Cost Avoidance

With the right measures in place and effective strategies, organizations can successfully avoid unnecessary costs. With a solid understanding of your supply chain and the ability to proactively solve issues at any point with supply chain management, you'll be able to mitigate the risk of high expenses. In turn, your business will be more profitable with a higher overall return on investment.

5. Look at Training Plans

There are many skills that your staff should have, which they can gain and develop through proper training. For example, you may want to train employees in demand management and coordinated inventory optimization. Inventory optimization is particularly critical today, as lead times continually change along with costs and consumer behaviors. With the right skill sets, employees can anticipate these changes and adapt accordingly. The best way to ensure sufficient training is to put together and enforce detailed training plans. 

Taking the Right Approach to Inventory Optimization

With the help of the right strategy and the most essential elements, your organization will benefit from successful supply chain management. Ask yourself if you have sufficient risk management, safety stocks, an understanding of the basics, cost avoidance practices, and training plans. Depending on what you're currently lacking, you can determine what resources or skills you need to be on top. As the times change and you encounter certain risks, you'll then have the chance to navigate them and minimize their impact.

Learn how hiring interim talent can help improve your supply chain management.