Three ways to improve inventory management for more complex supply chains.
Inventory management complexity increases as companies expand their business, especially in the context of supply chains that span multiple markets and channels. The basic problem for companies that manage operations across various countries is a lack of standard procedures for dealing with those suppliers and sales channels.
Among the largest corporations, managing sales channels and suppliers gets dispersed across various operating units globally. Managers sitting in the head office struggle to keep tabs on all their activities. They have difficulty gathering accurate and up-to-date information about their suppliers. For inventory management, in particular, that lack of clarity can impede business growth.
To give you an idea of the enormity of the problem keeping up-to-date records of suppliers, let’s look at what some of the biggest supply chains entail. Walmart, for example, has a network of over 100,000 suppliers. Proctor and Gamble works with more than 75,000 suppliers. And Nike has three different distribution channels. All these companies disperse operations across different countries and a breakdown in information for any of them could amount to serious coordination problems among their operating various units. The fact is, for most large multinationals, simply tracking the exact number of suppliers they work with at any given time is trouble enough.
A huge supplier base certainly has its positives. It encourages competition that keeps prices down, for example. However, problems do arise when it comes to inventory management, from basic operational issues to tracking a supplier’s business practice to ensure products meet quality standards. If they can’t manage suppliers well or subject inventory to strict quality checks, a brand can suffer.
A good example of this was a scandal in Europe a few years back in which beef products were found to have a significant percentage of horse and pig meat. The blame shifting that followed makes for a classic case of supply chain management failure. Not a single link in the supply chain was willing to take responsibility for the mistake.
A lot of other challenges in managing a high number of vendors across different geographical locations include different work cultures and ethics, dissimilar quality standards and quality control/assurance measures, and operations being affected by political climate. However, the biggest challenge always comes down to optimizing inventory management. Let’s look at some measures such organizations can take to better manage their inventory.
SET QUALITY CONTROL STANDARDS
It may not be entirely possible to control the quality measures of your vendors, but you can set up your own strict quality standards and communicate them to your vendors. Once you receive goods in your warehouse, ensure thorough quality checks. Inform vendors in the event they deliver products that do not meet your standards, and issue warnings or impose consequences where possible. If your organization takes the responsibility of transporting inventory from the vendor’s warehouse, ensure quality checks at that location. In the case of perishable items, it would prove useful to again make your products go through quality control measures just before they are transported to the retailers or shipped to consumers.
Whenever possible, locate warehouses where it is easy and cost-effective to receive supplies and ship products to consumers. The number of warehouses and locations depends on various factors. First, there is the region where you sell and the location of your suppliers. Another consideration is the availability of transportation and labor. (Will you manage your own warehouse or contract to a 3PL? If you manage a warehouse, will you be competing in a tight labor market? Will you operate your warehouse with limited hours or 24-hours-a-day?). Finally, your business may have some special requirements, such as facilities for cross-docking.
Having a centralized inventory management system is critical to the success of a supply chain with multiple warehouses. Visibility, availability and routing eCommerce orders to the right warehouse, for example, to get a product to a consumer quickly requires a free flow of data and inventory control. Hence, you need to have a centralized system which ensures smooth inventory flows and proper order fulfillment.
EXPLORE THE OPTIONS
Some businesses may not have the wherewithal to deal with complex supply chains and sales channels. They may prefer to use finite resources to focus on their core competencies rather than manage inventory and supplier relationships. Another reason could be that they prefer to have consolidated operations at a single location. In such cases, you could try a number of outside options. Amazon’s FBA and MCF have immensely helped a lot of businesses by taking care of this very aspect. Similarly, you can also use dropshipping options such as Shopify’s Oberlo, which helps you to find verified suppliers for your products.
These are just some pointers on how to manage inventory if you have multiple suppliers and different sales channel. In the end, every business has its own unique needs and strengths as well a unique business model. So, you need to devise your own approach to inventory management, depending on all these factors.
About the Author
Anand Srinivasan is the founder of Hubbion, a task management software solution.