How do you manage inventory during market disruptions?

1 Assess the situation

Assessing the situation and its impact on your business is the first step to managing inventory during a market disruption. To do so, you need to gather relevant information and data, such as the nature, duration, and severity of the disruption; the availability and reliability of suppliers and logistics partners; current and projected demand for products and services; inventory levels and turnover rates; storage capacity and costs of warehouses and distribution centers; and customer expectations and satisfaction levels. Analyzing this information will enable you to identify the main challenges and opportunities for your inventory management, so that you can prioritize your actions accordingly.

2 Adjust your inventory policies

Adjusting your inventory policies to fit the changing market conditions is the next step. Inventory policies are rules and guidelines that determine how much and when to order, store, and distribute your products. Reorder points, order quantities, safety stocks, lead times, and service levels are some common policies. Depending on the situation, you may need to increase or decrease certain parameters. If there is a surge in demand due to the disruption, ordering more frequently and in larger quantities may be necessary, as well as increasing safety stock and service level. Conversely, if the disruption reduces demand, ordering less frequently and in smaller quantities should be considered, alongside reducing safety stock and service level.

3 Optimize your inventory allocation

The third step is to optimize your inventory allocation across your different channels, locations, and products. This process involves distributing your inventory to where it is most needed and profitable. When making decisions, consider the sales performance and profitability of each channel, location, and product; the customer preferences and behavior; the inventory costs and constraints; and the inventory visibility and flexibility. Optimizing your inventory allocation can maximize your sales potential, customer satisfaction, and inventory efficiency. For instance, if a disruption affects some channels or locations more than others, you can reallocate your inventory to those with higher demand or lower costs. Similarly, if the disruption affects some products more than others, you can reallocate your inventory to those with higher margins or lower obsolescence.

4 Communicate with your stakeholders

The fourth step is to communicate with your stakeholders about your inventory situation and plans. These stakeholders include suppliers and logistics partners who provide and deliver your inventory, employees and managers who handle and monitor it, customers and prospects who buy and use your products, and investors and regulators who oversee and evaluate your performance. By communicating with them, you can build trust, collaboration, and transparency. You can also gain feedback, insights, and support to improve your inventory management. For instance, you can inform your suppliers about your needs and expectations to negotiate better terms, inform your employees about policies and goals to provide them with the necessary tools and training, inform customers about availability and delivery options to offer incentives or alternatives, and inform investors and regulators about performance challenges to demonstrate resilience.

5 Monitor and review your inventory performance

The fifth step is to monitor and review your inventory performance and adjust your strategies as needed. You should measure and evaluate your inventory performance using relevant metrics and indicators such as inventory turnover, accuracy, carrying cost, shrinkage, fill rate, and stockout rate. Through this process, you can identify the strengths and weaknesses of your inventory management and take corrective or preventive actions. Additionally, you can compare your inventory performance with your benchmarks and targets to track progress and improvement. Furthermore, you can use your inventory performance data to forecast and plan future inventory needs and actions.

6 Learn and improve your inventory skills

The sixth and final step is to learn and improve your inventory skills and knowledge. Inventory management is a dynamic and complex skill that requires constant learning and improvement. You should stay up-to-date with the latest trends, technologies, and best practices in inventory management, as well as learn from your own experiences and mistakes. Additionally, you should consider reading books, articles, blogs, and podcasts on inventory management; taking courses, workshops, webinars, or certifications; joining online or offline communities of inventory professionals; seeking mentorship or coaching from experts; experimenting with new ideas, tools, or methods; and reviewing and updating your inventory policies and procedures regularly. By doing so, you can enhance your competence, confidence, and creativity in managing inventory during market disruptions. Moreover, you can gain a competitive edge, increase your value, and advance your career in inventory management.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?