In March of this year, Covid-19 caused widespread disruptions in virtually every supply chain. Astonishingly, nowhere was this more evident than with toilet paper. The empty shelves made it look like an inventory problem on a global scale. Instead, we discovered it to be a rebalancing issue. Now, with more people flushing at home than the office, manufacturers had to retool production to meet increasing residential demands offsetting commercial demands.
Overnight, commercial production facilities adapted with new equipment, new sources of supply, and new processes to accommodate the changes brought on by quarantines. The next step was to realign inventory across the supply chain from existing and new manufacturing plants thru distribution, warehousing, and finally retail.
Now, six months later, we’ve come to realize that massive disruptions to supply chain operations are quite possibly the new normal, thus raising the question: how can inventory be managed to a new model of constant disruptions? The answer is through flexible inventory management with systems that allow corporations to plan and prepare.
Committing Inventory on the Fly. Consumer activity did not stop because of temporary storefront closures. Instead, it shifted consumers to an online e-commerce platform for most of their purchases. Previously, consumers who could immediately see inventory that was available on a shelf suddenly found themselves competing for inventory virtually that they can no longer see. How can the consumer have confidence that the product they need is available and guaranteed for them? Committing inventory on the fly guarantees inventory to the consumer before the order is ever processed, creating real-time visibility for both the consumer, the distributor, and the manufacturer. As consumers and corporations move more purchases to an e-commerce platform, the inventory management system needs to have the flexibility of guaranteeing inventory before the order is ever finalized by the consumer.
Committing your future inventory. The toilet paper shortage decreased consumers’ confidence that products will be available when they need them. As a result, many are placing orders as far as a year in advance to guarantee the product they want will be available. Rather than commit current inventory to a future order, warehouses have learned to be flexible in handling future orders by committing future inventory. This allows businesses to balance between the now and the later, cultivating flexibility in inventory management to meet consumers' immediate and future plans.
The magic behind committing your future. To guarantee that future orders can still be met without grabbing from inventory on hand, incoming inventory needs to be reserved to fulfill future orders. Reserving inventory automatically for future orders allows corporations to keep inventory available for immediate orders and still fulfill commitments. The magic behind committing your future lies behind the scenes, automatically reserving incoming orders to fulfill future orders with your ERP system. With the complexity of today’s supply chains, inventory can no longer be managed manually by users through phone calls and spreadsheets, but through sophisticated systems that automatically plan and build in inventory flexibility to meet the new normal for the present and the future.
As many industries adjust their operations to meet the shift in demand and changes in buying behavior, the next step is to make sure that inventory is aligned to this new normal. Corporations thriving during the pandemic have employed flexible inventory management solutions that plan for the now by committing inventory on the fly and anticipate the future by reserving incoming inventory to meet future needs.
Distribution Product Manager at Nextworld – ERP Redefined™
Cole is the product manager for the procurement and inventory teams at Nextworld. At the United Launch Alliance (ULA), Cole served as a material planner, buyer planner, and ultimately became the subject matter expert for SAP supply chain operations where he managed strategic sourcing, purchasing, planning, and inventory management. Cole has a Business Administration degree as well as his MBA from Colorado State University.