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While lockdown measures are lightened and re-imposed at different rates around the world, customer demand for many items proceeds to rise and fall accordingly. And as countries around the world are responding to Covid-19 in various manners, the virus has caused an unprecedented disruption in supply chain planning. The immediate impact on the supply chain is twofold. First, retail businesses must closely monitor short-term and long-term demand and inventory to adjust production loss in the wake of various factory closures and general economic lockdown. Second, retailers face inventory depletion as consumers tend to stock up in preparation for potential quarantine and extended stays at home. Either way, one thing is sure, this is a once-in-a-generation test of business continuity, supply chain flexibility, and inventory planning.
Inventory management teams face the ultimate task to effectively plan and secure their stock requirements during the pandemic and beyond, as they need to overcome many fundamental challenges. As the operational and financial consequences are severe, inventory planning cannot be based on the steady models on which most existing inventory planning systems are based. Now they must make decisions using real-time information obtained by close collaboration with nearly all other company functions to ensure execution plans are aligned and are meeting all critical company needs. In this article, we are going to talk about multiple ways of how you can improve inventory planning in your company amidst the Covid-19 pandemic.
Forecasting Demand
Moving forward with customer’s buying patterns so unpredictable, producing accurate forecasts of demand is one of the most challenging tasks that inventory planning teams will have to face to successfully overcome the crisis. The planners must closely monitor demand trends that are key to ensuring stock levels match the customers’ requirements. Demand trends are moving fast like never before, and inventory managers who are stuck with manual forecasting can easily get left behind. A highly accurate demand forecasting tool can regularly review projections to make sure they reflect the marketplace, so the inventory management team can react quickly and maximize sales opportunities and prevent a build-up of excess stock.
To get the most realistic demand projections possible, in these uncertain times, it’s wise to use qualitative forecast data and human insights to augment quantitative inventory forecasts. Human insights include feedback from the sales team, market intelligence, and insights from your customers. According to this beginner’s guide to inventory management at apparel magic, poor forecasting can result in stock-outs or overstock, obsolescence, rushed inaccurate orders, and inefficient resource utilization. Since those events are harmful to the company and should be avoided at all costs, make sure to find the balance by utilizing digital forecasting software and qualitative forecast data (human insights).
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Maintain Inventory Accuracy
Since inventory isn’t something you can “set and forget,” regular checks to make sure that the amount of merchandise you have in your system is consistent with what you have in your store is more important than ever. Schedule a physical check of inventory at least once in a month, since buyers’ tendencies change from day to day. You can easily get overwhelmed by the process, so crucial information about inventory may be missed if you don’t have both hands on the wheel.
Schedule the physical inventory check outside of regular business hours so that stock levels won’t be in flux. Prepare all the necessary stock-taking materials and procedures as a physical inventory count sheet and a map of your store or stock room that details where products are located not to waste time. Equip the staff with count sheets, make sure they know how to fill it out appropriately, and give them an orientation well before inventory counting. Afterward, proceed to the physical count of the merchandise. Once you start counting, avoid jumping from one category to another, and make sure you’ve finished counting a particular item or SKU before moving on to the next. Once you’re done counting, tally up the numbers and compare them with what you have in your inventory system. This way, you will always remain a step ahead of the twists and turns that the irregular buyers’ tendencies take in these uncertain times, and be better prepared in forecasting demand of goods.
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Make Sure To Invest In The Right Inventory
With cashflow being tight in nearly every enterprise, inventory management teams need to invest in a stock that will generate more revenue for the company and not sit in the warehouse. To make this possible, you should always have a detailed understanding of your inventory.
Most of the companies use the simple ABC inventory analysis as a stock classification model to categorize inventory based on each item’s value to the business. Under the Pareto principle, 80% of sales will come from around 20% of your inventory, so it’s essential to identify these items that make up approximately 20% of your inventory and set stocking policies to ensure regular supply. However, this is where things get tricky during this Covid-19 pandemic as customer demand for specific products tends to change at a faster and more variable rate than ever. Again, to get this part right, it’s of the highest importance to find a balance between your inventory software suggestions and physical checks of the inventory described in the previous paragraph. By knowing the exact needs of your loyal customers and the stock levels in your store, your business will be able to invest in the right stock items, keep stock-outs to a minimum and reduce the risk of excess inventory.
Strengthen Relationships With Your Suppliers And Consider Simplifying Your Offering
Now is the right time to build better human relationships with your suppliers and those you supply, as it will help you understand the possible difficulties other parties may be experiencing and how it affects your business. Plus, it will help you to find other suppliers or substitutes for the critical goods you sell in case your supplier faces particular difficulties that will stay present for the time being. Strengthening the relationship with the other parties of the process both up and down the supply chain can also be helpful when it comes to negotiating supply contracts.
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If demand across your products is or looks to be declining, simplifying your offering of goods can be an effective way to reduce inventory and storage costs. Closely monitor the sales and find the products that move your business the most. This way, you can re-focus on the business’s core products and their production, delivery, and quality.
Final Words
As the Covid-19 pandemic is disrupting the supply chains vital for businesses around the world, supply chain leaders and inventory management teams must take timely decisions and immediate actions to sustain these critical business operations. Make sure to address the crisis in the short-term by using responsible strategies to build greater inventory planning resilience for the future.