2021 is set to be another tough year for supply chain management teams. Effective supply chain planning is more critical than ever to overcome challenges such as Covid-19 and Brexit, together with global and local economic and political uncertainty.
Here’s our three-step, no-fail approach to resilient supply chain planning. We also throw-in some tips on how to overcome the inevitable supply chain volatility that lies ahead!
Before creating any future supply chain strategy it’s best to reflect on previous performance. It therefore makes sense to invest time in reviewing what decisions and processes have and haven’t worked over the past twelve months. For example, did inaccurate supply chain forecasting lead to stock-outs? Or did a lack of resource impede your ability to respond to the coronavirus crisis?
Analyse your supply chain key performance indicators (KPIs), identify what you could do better and produce an action plan for improvement.
Covid-19 looks set to continue to impact many supply chains well into 2021, whilst the consequences of Brexit are still taking shape. Issues may include suppliers going bankrupt, increased logistical costs, new / more complex import and export tariffs – the list is endless.
Arguably, the biggest risk to your supply chain is the uncertainty. Unfortunately, this is a given, so it’s critical to make your supply chain as responsive, robust and agile as possible.
Supply chain volatility is almost impossible to avoid. In 2020 we saw customer demand rise and fall overnight with national lockdowns occurring at different rates and severities across the globe. At the same time, the supply of inventory was impacted due to factors such as factories closing, reduced workforces and compromised transportation, to name a few. However, businesses should not only focused on the obvious effects of the pandemic, there are many other issues that should also be planned for over the coming months and years. These include environmental legislation, climate change, economic downturns and political unrest – all have the potential to cause future supply chain disruption.
Here’s some top tips to help you mitigate the risks of supply chain volatility:
For businesses with tight cashflow, holding excess stock ties up vital working capital that could be used elsewhere in the business. But at the same time, a certain amount of surplus is needed to cover demand peaks and deal with supply chain disruption and longer lead times.
It’s therefore critical to have a transparent and detailed account of the inventory you hold, so you can optimise levels, whilst being responsive to market demand.
You can then identify potential problematic inventory items e.g those whose lead times were previously affected by the pandemic, or those that come from suppliers in countries impacted by Brexit.
Produce a supply chain inventory action plan to mitigate the risks. Actions could include increasing safety stock levels to cover longer lead times or peaks in demand. Or you may need to expand your supplier network, so you have more procurement options if one route becomes unfeasible.
Smarter supply chain planners will also centralise their inventory planning activity. With a global view of all stock, it’s much easier to redistribute goods to reduce stock imbalances e.g move items around to prevent stock-outs in some warehouses whilst there could be excess items in others.
Supply chain forecasting is challenging at the best of times but add a wealth of external supply and demand variables and it can seem impossible.
Effective supply chain forecasting requires a mix of both quantitative forecasting e.g using historical sales data to predict future demand, and qualitative forecasting e.g 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.
To respond effectively to the challenges of supply chain volatility inventory management teams need to be focused on managing customer expectations and solving disruption issues. Supply chain digitalisation will help automate everyday, manual tasks, so teams have more time to respond to problems that arise. Digital supply chains also ensure data is more accurate so decisions can be made based on facts and not ‘guess-work’.
Tools, such as warehouse management systems and Radio Frequency Identification (RFID) technology can improve inventory control, providing real-time data on stock as it moves through a warehouse and, improving pick, pack and dispatch efficiency.
Inventory optimisation software can also help by dramatically reducing the time spent on manually producing forecasts and updating planning parameters, such as order quantities, reorder points and safety stock levels. Instead these are automatically calculated by the software and the output is a daily list of purchasing recommendations that can be fed back into an ERP. Users are then able to manage-by-exception, interrogating the data and making smart adjustments.
Looking ahead to 2021 and beyond, organisations need to pre-empt the demand and supply challenges that lie ahead and ensure robust supply chain planning processes to overcome them. If your team struggled to forecast demand and optimise inventory levels last year, make sure you learn from past mistakes. Consider investing in technology to make your supply chain more robust and agile, to respond quicker to volatility and disruption.
If you’d like to know more about how EazyStock can enhance your supply chain planning processes, call us on 0121 312 2992 or request a demo.