5 Ways to Minimize Ongoing Supply Chain and Inventory Problems
Product availability is a huge issue in today’s economy. Distributors have been hit hard by the dilemma, which has been far worse in the past few years than in any previous years. Though supply chains are starting to get better, they are not going to be fixed in the next 12 months.
So, how do distributors face these problems today and keep their customers from going to competitors?
The experts at Dorn Group suggest five different ways you can minimize those supply chain and inventory problems to ensure you keep your customers:
Let’s take a closer look at each way you can minimize the ongoing supply chain and inventory problems faced by distributors across the globe.
1.??Talk to Your Manufacturers
Communication is key. Some distributors go into meetings with their manufacturers and say, ‘Here’s what I need from you.' Instead, they should approach these meetings with a desire to work together with the manufacturer to combine information from both parties.
?We have data and two years of history that tell us you’ve got to talk to manufacturers and understand what high moving SKUs they have. They should be able to give a better forecast than they did two years ago.
You should even over-communicate with your manufacturers. Make sure you are good partners together, and that you’re working jointly toward your common needs and targets. The more you work with one another to find new solutions and strategies, the more prepared you’ll be for upcoming complications or changes.
2.??Understand Which Products are Offshore Products
Distributors need to understand which of their product categories are sourced offshore. They could be private labels or products they're sourcing through some other partner. Those will have a higher probability of supply chain issues.
To avoid those problems, you’ll want to learn which of your products are offshore. Then, build inventory levels of those products wherever possible. Use that to get you through any increases or major pickups in the supply chain you might experience over the next 12 months.
The last thing you want is for that inventory to back up when demand from your customers is high. If you can’t get it through your supply chain in time, that will cause problems.
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3.??Optimize Inventory Across Warehouses
If you’re a distributor with a hub and spoke model, you may have several local branches. It’s common for many distributors with this model to have an RDC inventory which feeds into those branches overnight or same-day using a truck system.
Those local branches should have a very high inventory level of your A and B products, your top selling SKUs. This ensures you can serve customers the same day.
The number one way to lose a customer is to not have what that customer needs in stock.
They’ll go to your competitor and may have a good experience with their service instead. After that, they’re not likely to return to your business to find what they’re looking for.
Have a buffer inventory at your RDCs, and plenty of inventory of your As and Bs at your local branches. That way, you never run out of high velocity, high-importance items that will upset customers if you don’t have them.
4.??Move Critical Lines and Categories into Domestic Products
As more manufacturing is coming back to the U.S., and even a majority of North America, it’s very important to advise distributors to move toward more domestic products. Since there’s more of a trend today in manufacturers investing in the U.S., you’ll have a larger amount of product available to you.
If you’re a distributor, it’s important to understand which suppliers are investing here in the U.S., and to build contingency plans where you could move some of those product categories into domestic products. Work together with those suppliers to know what you should switch or move so you can be prepared with consistent and reachable inventory as your customers need it.
5.??Use an ABCD Inventory Management System to Prioritize
If you organize your inventory management this way, you’ll be able to prioritize what you’re going to look at. If you are an average distributor, you might have 50,000 or 100,000 SKUs you sell in a year, but you’ll want to have 1,000 of your A and B SKUs that are your highest selling. Really concentrate on those.
You can’t effectively manage your team over everything if you have 50,000 to 100,000 SKUs, but you can manage As and Bs to make sure you’re not running out of those main items. It’s a similar situation to when your local grocery store is out of bread and milk. If they don’t have those everyday, necessary staples in stock, they’ll lose customers.
So, put effort into As and Bs. It’s the winning formula for distributors to manage those items. Unfortunately, many distributors don’t manage them well.
Moving into the next year, make sure you build contingency plans for how you’re going to improve your inventory holdings and your supply chain according to the highest demands and end customer needs. This will help you be prepared to deal with continued issues in the supply chain, for however long the problems extend into the future.