For many companies, product availability is an essential element of excellent customer service. Achieving high inventory availability without maintaining high inventory levels is a challenge – but it is possible. The secret is optimizing.
Many companies are afraid of stocks – and they are. Ten years ago, it might have been a good idea to ask your customer to wait several weeks for the product in stock. Today you will most likely lose that customer from another supplier if you can’t deliver. After all, your competitors are just a click away.
Given the risk of inventory, reputational damage, and lower profits, some companies will store large quantities of each SKU to meet demand. It is a terrible idea for having these three reasons:
- It hurts your inventory turnover rate.
- It ties up working capital and increases transportation costs
- It increases the risk of inventory overload and being out of date
Instead, it would help if you found a way to fill orders without increasing availability. You can do this if you incorporate inventory optimization techniques into your inventory management practices. The inventory optimization method ensures that supply and demand volatility considers when determining your demand forecast, inventory levels, and fill parameters.
Tips to say goodbye to the product availability issue
Sales and Operations Planning (S&OP) means joint and synchronized planning between companies to produce the right product in the right quantity to meet sales and cost targets. Apart from different software tools and philosophies, S&OP is a meeting between managers from diverse backgrounds to achieve a common goal of meeting customer needs.
Clear guidance, accurate records
Suppose the computer shows that the product is in production and is actually in the works. In that case, it is likely to impact one’s customer orders negatively—much of this confusion caused by poor records or unclear policies or procedures. Data is at the core of management planning and essential for precise and accurate information flow.
The systems that make and deliver products must be reliable, but they must have control before relying on them. It sounds easy, but many companies today have control issues. In many cases, lack of information visibility is the main reason.
The control system allows company managers to determine their operational limits. Once the company is aware of its systems’ capabilities, managers can begin to identify the reasons that affect these functions and improve them. Knowing your limits and raising these limits forms the basis for stable, reliable, and flexible care. With a dependable and straightforward operating system comes a reliable and flexible response.
Improve your storage exclusion
Okay, now we need to make sure we have enough supplies to meet that demand. But how much supply do we need?
We need sufficient supply to meet the estimated demand while the collection replenishes. However, this period’s length depends on when your next set of inventory is in the chain.
If you have enough stock in your product, keep up with demand while inventory replenishes – that’s great. You don’t need to take immediate action. However, you may want to monitor this item if the order differs significantly from the forecast
It applies not only to the organization but also outside it. Suppliers, delivery service providers, and contractors are essential business partners, and this partnership needs to translate into real and tangible ways. It is mainly because the system’s effectiveness depends entirely on how well the “partners” do. Availability is questionable when the company has 90% production efficiency and 50% transportation reliability.
Product availability does not always have to include 100% items, but items when the customer needs them. It is an excellent game for determining the time to prepare the thing closest to when the customer is looking for it. Requires planning (S&OP), clarity and accuracy of guidelines and data, consistent control, continuous improvement, and constant connections with business partners