Maintaining correct inventory levels is the first step in helping any business drive revenue, profit and customer experience. However, the task of inventory management in supply chain has become more complicated in recent years with the growing complexity of global supply chains across borders and regulatory environments, as well as increased reliance of third-party manufacturers, transporters and agents.

As supply chain networks become more complex, the number of factors that can adversely impact your inventory management grows, while the rate of change has also accelerated in recent years.

To manage inventory in supply chain efficiently at scale, supply chain teams need to be able to track activity across their network to proactively find issues and opportunities, and make the right decisions to maintain optimum inventory levels.

What is inventory management in supply chain

Inventory management is one of the most critical functions of supply chain, tracking volumes of inventory from ordering, through manufacturing all the way to the warehouses and locations of sale. Effective inventory management enables a business to have the right products in the right place at the right time to meet customer demand without over ordering.

In this way, inventory management fulfils the core need of the business to have products available for sale and to enable the rest of their business functions.

Inventory management extends across the broader upstream and downstream supply chain, managing the flows of supplier exchanges and eventual customer demand. For businesses managing their own manufacturing, this starts with ensuring that they have adequate raw materials, then ensuring that production and output, along with the speed of transport and delivery, are aligned with the demand predictions at the point of sale.

However, in practice, there are a range of issues that can complicate this task, from structural issues to market trends, that need to be carefully managed.

Why is inventory management important in supply chain management

The goal of inventory management is to balance supply and demand – while this has always been a delicate balance, recent years have made the task even more difficult, especially for businesses with long-distance supply chains.

Key challenges include:

  • Highly variable demand side conditions due to varying economic conditions
  • Supply side disruption from material shortages
  • Increased transport costs and fuel prices affecting margins and SKU-profitability
  • Shipping disruptions from geopolitical events
  • New customs and regulatory effects due to Brexit
  • Driver shortages for last mile and cross-land transport

All of these factors have made the act of accurately matching supply and demand significantly harder, disrupting solid state systems that underpinned traditional S&OP and S&OE processes. And given the interconnectedness of global supply chains, small disruptions in one area of the world, say at a raw materials site, can have serious impact elsewhere.

Failures in inventory management can have serious consequences for a business. For example, if a supply chain manager fails to secure adequate inventory of a crucial component, production can grind to a halt, or shelves be left empty for an important launch, damaging revenue and customer trust for the business.

Meanwhile, too much inventory can also be a significant problem as over-ordering ties up capital, complicates warehouse management, and could leave a business with a surplus of stock that has to be sold at a discount or even written off altogether.

In a disrupted market, inventory visibility in supply chain is essential to track the various factors affecting supply and demand and enable businesses to manage inventory effectively.

How can supply chain visibility improve inventory management?

Given the wide range of issues that can affect inventory management across the supply chain, teams responsible for maintaining correct inventory, including commercial, logistics and supply chain, need the right data to catch, quantify and resolve relevant issues.

Supply chain visibility is the ability to track every step of your supply chain – from raw materials to order, manufacturing and transport all the way to the customer, connecting data points from all over your supply chain ecosystem, including internal order and inventory data, manufacturing updates, transport progress and warehouse information.

By using insights in a strategic way, teams can mitigate inventory management issues to avoid over- or under-stocking, maintain consistent revenue and avoid costly fixes.

Team coordination

Inventory management begins with a clear view of what’s needed and when. Within a business, stakeholders include supply chain teams, logistics, buyers and commercial teams, as well as various levels of management.

However, different incentives between teams and a lack of clear, shared information can leave teams working at cross purposes, leading to issues like commercial teams placing additional orders rather than accelerating existing orders, leading to a risk of being overstocked.

Supply chain management platforms like Zencargo create a unified view of all key supply chain data

  • Digitising purchase orders at point of creation
  • Connecting directly to manufacturers and carriers to source real-time information on production and transport
  • Direct integration with WMS, ERP and front-end sales systems to source complete, accurate data

This enables teams to track and plan for inventory levels together, creating joined up decisions and avoiding over or under stocking based on real-time information.

SKU-level accuracy

Inventory management also requires the right level of detail. While orders may be placed for a certain volume of goods, issues with production, quality assurance or loading can lead to orders falling short, leaving your inventory depleted.

Logistics teams often only have visibility of orders at the container level, without the necessary detail to catch potential issues. By building SKU-counts into your supply chain data flow, planners can more accurately compare actual volumes vs orders to catch potential issues early and either place additional orders or re-allocate inventory as needed.

Lead time visibility

Fulfilling inventory is a careful balance of time and volumes – orders that arrive too early or too late can leave you holding too much or too little stock, but getting accurate lead time data from suppliers can be frustratingly difficult.

This often leads to planners building in buffers, either ordering more stock than they need in case future orders arrive late, or ordering earlier than they need. Either option ties up working capital and warehouse space longer than needed.

Zencargo’s platform records and centralises lead time on a supplier and SKU level, providing accurate data for each product to guide buying decisions and reducing the need for buffers and guesswork, ordering just the volumes you need, when you need them.

Agile inventory management

Once orders are in transit, there are a variety of potential issues that can impact inventory management, from delays, to congestion and customs issues. To accurately plan, it’s essential to catch these issues early in order to mitigate potential shortfalls.

Zencargo’s Intake Planning view shows planned intake, from ERP integrations and purchase orders, alongside expected intake via updates from manufacturers and shippers.

With real time visibility, commercial and logistics teams can quickly find gaps or surpluses in inbound supply and then act accordingly. This might require slowing down some shipments that risk overstocking warehouse space or wasting stock, or expediting an urgent SKU to avoid a stockout.

Optimising your inventory management with Zencargo

In today’s market, a visible supply chain is essential for effective inventory management. That’s why Zencargo integrates the most important data across your business needs to help your team make the right decisions at the right time about your inventory.

To find more why visibility matters, download our research report ‘The Supply Chain Data Crisis’ or book a call with one of our team to find out how you can streamline your inventory management with Zencargo.