Exercise equipment, computer chips and breakfast cereals, we have seen all. The world ran short of some really basic products in 2020 during the pandemic. Post Covid global supply chain management(SCM) are still in severe aftershocks. Consumer demands may have bounced back but supply chains are still feeling challenged to deliver basic items.
Here are some strategies to minimize risk and manage supply chain shortages in 2022
Use SCM Software to put your available inventory for best use
Many times due to lack of SCM software, businesses are not even aware that they have some inventory left. So, if a business has some inventory left then they should make sure it’s being put to the best use with automation.
This is where advanced supply chain planning systems can really come handy, by allocating the stock on hand according to your business goals, such as profitability, sales maximization or gross margins.
In normal times, companies are more interested in optimizing inventory to reduce cost or maximize revenue to grab market share but in times like these, with severe shortages, companies are interested in optimizing for margin. A company can detect and correct possible stock imbalances by re-distributing excess stock in the network to other locations.
Work on your product portfolio
When Covid-19 hit, manufacturers scrambled to meet demand. They were not aware of a radical shift in consumer buying patterns and behavior. The demand shifts gives an unique opportunity for companies to rethink their product portfolio and rationalize it to make sure it’s focused on the more critical subsets.
A brand has to identify products that are surging and dwindling in demand and create a strategic value for each product in the portfolio. They have to assess potential opportunities to collaborate with business partners to bring new products to market
Re-evaluate your supply needs and search for alternates
A business has to reevaluate supply orders that will contribute to higher margin sales, which are most likely to sell, or what’s needed to fulfill backorders quickly. They also have to evaluate equivalent items that may be good substitutes for those in short supply. For example, if item A is not available and item B is an equivalent alternative item available to order. This technique is ideal for lower margin commodity type items but not for higher margin specialized items.
Stress test your SCM
Planning a supply chain is not new but when supply chain shortages occur, nothing goes according to the plan. One of the ways to make sure your supply chain is resilient and ready for a crisis is to test it.
Stay on top of your inventory management
Inventory management is absolutely critical in these crises. The last thing a business wants to do is for people to buy items that are out of stock and unavailable. The company has to start going through their warehouse and analyze their own inventory. During inventory evaluation inventory management tools really come in handy and make this process easy. This software is especially helpful when the company sells in many locations like retail stores, local markets, and online marketplace like amazon. Everything has to be synced properly so that all the information is always up to date.
Adjust pricing as needed
A company may be able to find the materials and products but during shortages they’re highly expensive. This means that the company may have to increase the prices of products to adjust the cost of material and SCM. After all, the prices of products increased by 5.4% in the last 4 months because of higher transportation cost, labor shortage and material costs.
A brand has to analyze what they are paying for the products and materials so they can have a good idea of how to maintain their profits. Once the right number is calculated, businesses can update it on their website.
In times of shortage, minimum wastage is the best way to survive. The fewer material and products that get thrown away, the more sales a company can make. A business has to evaluate its manufacturing cycle to know where they are wasting most of their material. Even on the website it’s best to provide detailed product descriptions that include pictures and answer the most common questions.
Optimization and automation
Optimized and automated supply chains generally have 15% overall costs, less than 50% inventory holdings, and a faster cash-to-cash cycle. Companies who have still not optimized their SCM often face inventory shortages, excessive costs etc. Supplymint is an end to end SCM software. Connecting all tiers of planning, purchase, tracking inventory, and sales on one collaborative platform. This offers demand and OTB planning through proprietary AI. Its assists in accurate demand forecasting so that you don’t have inventory shortage. . It comes very handy in times of shortages as it takes into consideration factors like seasons, trends, yearly patterns and other anticipated changes. There are modules as well to make your SCM process completely automated and optimized.