How to Secure the Inventory You Need During a Supply Chain Nightmare Here are six ways to secure the inventory you need when facing a supply chain disruption.
By Joseph Camberato Edited by Chelsea Brown
Opinions expressed by Entrepreneur contributors are their own.
Inventory management sounds simple enough in theory, but real-life logistics can quickly become very overwhelming and complicated. The Covid-19 pandemic disrupted the supply chain overnight, affecting everything from consumers' ability to buy toilet paper to a skyrocketing housing market. We're not completely out of the woods yet, but we're getting closer.
But even if we aren't in the midst of a global pandemic, you can still encounter a situation that creates a supply chain nightmare. Inclement weather, trade restrictions, work strikes and geo-political events can all lead to inventory challenges for businesses.
It's really a matter of when — not if — a supply chain problem happens, which is why it's crucial to prepare your business ahead of time. These six strategies can help you secure the inventory you need when facing a supply chain disruption:
Related: Inventory Management: The Key to Strengthening Your Supply Chain
1. Diversify your suppliers
Relying on only one supplier seems straightforward and efficient until a problem arises. Suddenly, that supplier is out of commission, and you can't secure the inventory you need to meet deadlines or provide the products/services that your clients expect from you.
That's why diversifying your suppliers is so important. If there's an issue with your primary supplier, you always want to have alternative suppliers you can turn to at a moment's notice. Once you've identified a couple of options, you should complete the onboarding process with those companies as soon as possible. If a problem arises, you'll be ready to move forward with one of your backup suppliers immediately, which reduces your downtime and ensures you can get back up and running promptly.
2. Build a good relationship with your suppliers
Your suppliers are a crucial aspect of your business, so you don't want to neglect this relationship. Maintaining a good supplier relationship can lead to faster delivery times, greater customer satisfaction and lower costs.
Don't just reach out to your suppliers when there is a problem — establish a consistent line of communication with them. Make most of your interactions positive, and if an issue does arise, make sure to address it in a professional way.
Speaking of communication, you should tell your suppliers what's happening with your business and remind them that they're an essential part of your company. If you focus on being a good customer and showing your appreciation, you'll reap the rewards for years to come.
3. Track your metrics
Many businesses have seasonal inventory needs, while others find that their inventory stays consistent throughout the year. Tracking your metrics will help you get a better sense of what your inventory needs will be in the future.
An inventory management system is the best way to manage these metrics, which we'll discuss in more detail below. Make sure you're tracking the right data, and more importantly, accounting for any irregularities in your sales reports. Knowing what your business can expect will make you better prepared to deal with the unexpected.
Related: 5 Ways of Effectively Navigating Supply Chain Disruptions
4. Prioritize your inventory
You may order a wide variety of inventory each month, but not all of it has the same value to your business. Some inventory items may be crucial to your operations, whereas others you can get by without for a period of time.
That's why it's a good idea to prioritize your inventory and supplies. The ABC analysis prioritizes your inventory into the following categories:
A: A-items are essential inventory items to your business. These items bring in the most profit and are things you can't afford to operate without, including raw materials or high-selling products.
B: B-items are important, and you want to have some in stock, but they aren't quite as crucial as A-items. These could be products that don't sell as well or have a high margin.
C: C-items are your least important inventory items. They're worth very little, but they do play a role in your company's success.
The ABC analysis can help your business control its costs and identify the products that are in high demand. It can also help you negotiate with your suppliers. Since most of your revenue comes from A-items, it makes sense to try to get better terms for that inventory.
5. Use an inventory management system
Many entrepreneurs still use Excel spreadsheets to manage their inventory, but there are more efficient ways to keep track of this data in 2022. For example, an inventory management app allows you to check the status of your inventory from your phone, tablet or computer, all of which are likely close by as you oversee the day-to-day of your business.
You can set up alerts to warn you if you're running low on a specific item or if a product is nearing its expiration date. With the right software, managing your inventory and working with your suppliers/vendors will become much, much easier.
6. Hire an expert to help
If you're struggling to get a handle on your inventory, you may want to hire an expert to help you. Consultants or logistics experts can objectively evaluate your business and help you develop a better strategy. You can also consider outsourcing your inventory needs altogether to a third-party logistics company.
Related: Using Tech to Build Supply Chain Resilience in a Changing World
Supply chain disruptions are inevitable and largely out of your control, but you can put your business in a position to be better able to deal with them as they arise by taking proactive steps today. By building a strong relationship with multiple vendors, knowing your data and using technology to manage your inventory, you'll be able to deal with ups and downs in the supply chain, and more importantly, ensure your business can stay competitive.
