The strategy behind inventory management in ecommerce and retail, difficult in the best of times, has gotten even trickier as inflation continues to dog the economy in the latter stages of Q2, supply chain issues linger and costs rise.
Between materials and labor for manufacturers, supply chain and delivery and inventory carrying or storage, the cost of goods continues to skyrocket. Consumers meantime are growing extremely price sensitive, dealing with sticker shock on everyday goods like gasoline and groceries and resetting household budget priorities accordingly. While spending increased in April, it happened at the expense of savings rates, never a good sign.
Many companies have found themselves with tons of excess inventory, as concerns over when goods would arrive from overseas led to a “just in case” vs. “just in time” approach to managing stocks. Just look at Target and Walmart as two recent examples of inventory being a factor dragging down profit, and Wall Street has no patience.
At the same time, those inflationary pressures on consumers have crimped sales in many instances. Companies as a result have been running promotions to move excess inventory, either left over from Q4 or a season that passed, or it was just overbought. Those markdowns are hitting the bottom line, while the cost of inbound orders behind it continue to grow.
If you have leftover inventory that can be held for upcoming 2022 demand periods, Q4 and otherwise, and it isn’t expired for one reason or another, consider yourself fortunate. This helps you avoid the risk of higher costs from overseas suppliers, even if it means increased carrying costs in the meantime. And storage space is at a great premium, so forecast those costs becomes a critical element as well.
Until the bigger picture begins to brighten, finding every avenue of cost savings and efficiency is the order of the day in inventory management. For instance, communication and synchronization between OMS, WMS and ERP becomes invaluable, to determine in near real time if a FIFO or LIFO protocol is called for in a particular product category. Business intelligence tools for analysis and reporting on order status and allocation for visibility into available/on-hand inventory is also crucial.
Sampling inventory as it comes it is another best practice. Were the inbound orders packaged correctly? Do they meet minimum/maximum and cube limits, or are they too big or too wide, too small or too heavy to be handled by conveyance and automation? Was the label applied correctly? Is it ecommerce or wholesale ready? All these elements can slow down outbound fulfillment, adding to costs, and need to be communicated to suppliers.
In the end, it’s all about being flexible in terms of your purchasing and where and what you sell. As the macro environment continues to be challenging and consumer behavior is shifting, being able to position inventory as close to them as possible is the ideal state.