Difficulties in Inventory Management

Logistics Tech Outlook | Monday, January 03, 2022

Supply chain disruptions will become more widespread due to pandemics, geopolitical hazards, cyberattacks, natural catastrophes, and other such events.

FREMONT, CA: Perhaps the most important lesson for businesses affected by the COVID-19 outbreak is the importance of resilient supply networks. Businesses have suffered considerable financial losses due to supply chain disruptions and the inventory management issues that ensued.

According to a study of business executives conducted by The Economist Intelligence Unit and GEP, the pandemic cost businesses in North America and the European Union between 6 percent and 10 percent of annual revenue. Additionally, businesses suffered brand damage due to client complaints about their inability to keep appropriate inventories and complete orders on time.

To be competitive and profitable, organizations must modernize their supply chain management strategies and leverage next-generation technologies such as artificial intelligence, the internet of things, and blockchain to avoid supply chain disruption risks.

Consider the most frequent inventory management difficulties to understand better how firms might overcome them.

Inventory management's top challenges include the following:

1. supply disruptions: The global epidemic demonstrated how fragile global supply chains could be, mainly if they are not designed for resilience. Historically, organizations placed a higher premium on efficiency and cost reductions than resilience. Businesses are focusing their efforts in the aftermath of the pandemic on mitigating supply chain disruption risks by shifting to near-shore or local suppliers, establishing supply chain risk management teams and procedures, and implementing technology to streamline supply chain processes and increase transparency.

2. Volatility of demand and market: Managing unpredictability, market trends, and consumer behavior has been a significant problem throughout the pandemic. This instability and unpredictability resulted in multiple instances of excess stock when demand decreased or a shortage of items when demand for specific goods increased significantly.

To address such uncertainties, it is necessary to collect up-to-date market and buyer trends and estimate demand using advanced analytics to modify production rates appropriately.

3. Inadequate visibility of the supplier chain: Three primary reasons firms lack end-to-end visibility into their supply chains include the usage of walled systems, historical data, and inefficient inventory and warehouse management techniques, particularly those that rely on manual labor or antiquated technologies.

Without the capacity to visualize the entire picture, crucial inventory management questions such as the number of orders currently being processed, the number of purchase orders on their way, or the amount of safety stock required to meet demand is impossible to answer.

4. Inventory loss: Inventory management that is inefficient results in overstocking or understocking of products. Understocking a brand's inventory can substantially negatively impact its reputation and future revenues. Overstocking, particularly as demand declines, can result in losses due to deterioration, damage, or becoming deadstock.

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