2021 Strategies for Inventory Management and Supply Chain Recovery

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Supply Chain Trends 2021


You already know the biggest supply chain disruption of 2020: the COVID-19 pandemic. Despite increasing vaccine approval, the pandemic is far from over. A vaccine won’t magically eradicate the coronavirus; instead, it will take the vaccine coupled with additional widespread safety measures to usher in a ‘new normal’ – optimistically, by Q3 of 2021. But ‘back to normal’? That will be years.

With that said, how can you keep your supply chain running as smoothly as possible in the meantime? The prevailing effects of COVID-19 are uncertainty and disruption; the key to planning ahead for 2021 will be to analyze the effects of 2020.

The pandemic has impacted industries differently across the board. While some businesses and entire industries like hospitality and travel have been shutting down, others like consumer staples, technology and safety products/PPE are thriving like never before. In the middle, there are businesses that may have a diversified client base providing services or products across a range of industries and markets that seem to be maintaining the same level of business but in a much more turbulent environment.

The way you plan your 2021 will be unique to your business, depending on your industry and how you’ve been impacted. However, uncertainty and disruption are all but guaranteed for 2021. The best way to safeguard your supply chain will be by building resilience into your operations.

Supply Chain Performance: Reviewing 2020

supply chain planningTake the time to reflect on your supply chain’s performance this past year. How did your demand change? How were your suppliers affected? How did you react – and were your changes and decisions successful?

This can all be measured by analyzing the KPIs you track. Did you have frequent stock-outs after adjusting your forecast? Did you end the year with a large amount of excess or obsolete stock? Were any resources lacking to impede your response to the effects of coronavirus?

While it’s good to analyze and take stock of the effectiveness of your pandemic response, you need to add more frequent supply chain performance reviews into your supply chain management for the foreseeable future.

Prepare for Upcoming Supply Chain Risks

In a perfect world, supply chain managers would be able to foresee every possible risk and threat to their supply chain and have a strategy prepared to successfully address any challenges when the moment came. 2020 has proven time and again that we are not living in a perfect world. Supply chain volatility has been impossible to avoid with the advent of Coronavirus. Uncertainty is all but guaranteed in 2021 – the best course of action is to mitigate whatever risks you can. Here are a few strategies to implement to support supply chain resilience and make your supply chain as responsive, robust and agile as possible.

1. Optimize Inventory

Start with a detailed overview of what inventory is currently in your supply chain. Having a transparent and detailed account of what inventory you are currently holding will help you optimize your inventory levels while allowing you to be responsive to market demand.

Next comes crafting an inventory management plan to mitigate your greatest risks. What were your biggest challenges in 2020? They’re likely to continue into the new year. Maybe you need to boost your safety stock levels to cover longer lead times or unexpected demand peaks. Maybe you need to diversify your supplier network to cover any supplier closures or increased logistical/delivery costs. Maybe you need to minimize your excess stock to free up working capital to cover incoming costs. (For example, did you take out a loan through the Paycheck Protection Program? Depending on your terms, you may need to plan repayment into your 2021 budget.)

2. Improve Demand Forecasting

Supply chain forecastingDemand forecasting is challenging at the best of times but add an influx of external supply and demand variables and it can seem impossible. If you don’t have automated forecasting capabilities, be sure that you’re reviewing your forecasting more frequently than once per quarter or once per month going forward, as demand can drastically change. Additionally, keep an eye on demand outliers – is it a one-off or is this demand likely to become the new normal?

Effective supply chain forecasting requires a mix of both quantitative forecasting (using historical sales data to predict future demand) and qualitative forecasting (using subjective opinions from sources such as industry reports or feedback from sales teams or customers). Combining quantitative and qualitative forecasting models will give you a more well-rounded perspective of your upcoming demand requirements.

Supply chain forecasting should also reflect your inventory items’ positions in their product life cycle. For example you should adopt a different demand forecasting technique for mature products with steady demand, compared to items in decline where demand is become more erratic and lumpy. It’s also important to identify items with seasonal demand and adjust forecasts to ensure you make the most of demand peaks and prevent holding excess stock as sales taper off.

3. Digitalization

You’ve probably been hearing of digitalization for a few years at this point. Maybe it’s something that’s been on your “to do” list without any real urgency. Now’s the time to mark it “urgent”. Supply chain digitalization will help moderate everyday, manual tasks so teams have more tools to respond to problems that arise. Digitalized supply chains also ensure data accuracy and centralize information for transparency – doubly important for businesses expanding into eCommerce.

Digitalization also allows for automation with tools such as a warehouse management systems and RFID technology to provide real time data on stock as it moves through a warehouse and improve pick, pack and dispatch efficiency.

Inventory optimization software can also help by automatically producing forecasts and updating planning parameters like order quantities, reorder points and safety stock levels. This software links directly with your ERP and creates a daily list of purchasing recommendations based off the inventory data. Users then manage by exception and make tweaks based on experience.

Prepare your Supply Chain for 2021 Challenges

2021 will continue to strain supply chains in new and challenging ways. Organizations need to become flexible for the demand and supply challenges that lie ahead and implement agile supply chain planning processes to overcome them. If 2020 was a struggle for forecasting demand and optimizing inventory levels, learn from the mistakes you made. Consider investing in technology to make your supply chain more resilient and quicker to respond to volatility and disruption.

If you’d like to know more about how EazyStock can enhance your inventory management, give us a call at +1 (844) 416-5000 or request a demo.

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