Opinions expressed by Entrepreneur the contributors are theirs.
Inventory management sounds simple enough in theory, but the actual 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 booming real estate market. We’re not quite out of the woods yet, but we’re getting closer.
But even if we’re not in the middle of a global pandemic, you can still encounter a situation that creates a supply chain nightmare. Inclement weather, trade restrictions, labor strikes, and geopolitical events can all cause inventory issues for businesses.
It’s really a matter of when – not if — a supply chain issue occurs, which is why it is crucial to prepare your business in advance. These six strategies can help you secure the inventory you need in the event of a supply chain disruption:
Related: Inventory Management: The Key to Strengthening Your Supply Chain
1. Diversify your suppliers
Relying on a single vendor seems simple and efficient until something goes wrong. Suddenly, this supplier is down and you can no longer secure the inventory you need to meet deadlines or provide the products/services your customers expect from you.
This is why it is so important to diversify your suppliers. If there is a problem with your main supplier, you always want to have alternative suppliers that you can turn to at any time. Once you have identified a few options, you should complete the onboarding process with these companies as soon as possible. If something goes wrong, you’ll be ready to move forward with one of your backup providers right away, reducing your downtime and getting you back up and running quickly.
2. Build good relationships with your suppliers
Your suppliers are a crucial aspect of your business, so you don’t want to neglect this relationship. Maintaining a good relationship with suppliers can lead to faster delivery times, higher customer satisfaction and lower costs.
Don’t just contact your suppliers if you have a problem, establish a consistent line of communication with them. Keep most of your interactions positive, and if a problem arises, be sure to resolve it in a professional manner.
Speaking of communication, you should tell your suppliers what’s going on with your business and remind them that they are an essential part of your business. If you focus on being a good customer and showing your appreciation, you will reap the rewards for years to come.
3. Track your metrics
Many businesses have seasonal inventory needs, while others find that their inventory remains constant throughout the year. Tracking your metrics will help you get a better idea 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, account for any irregularities in your sales reports. By knowing what your business can expect, you’ll be better prepared to deal with the unexpected.
Related: 5 Ways to Effectively Manage Supply Chain Disruptions
4. Prioritize your inventory
You can order a wide variety of inventory each month, but not all are of equal value to your business. Some inventory items can be crucial to your operations, while others can pass you by for a while.
That’s why it’s a good idea to prioritize your inventory and supplies. ABC analysis prioritizes your inventory into the following categories:
A: A items are essential inventory items for your business. These items bring in the most profit and are things you cannot afford to operate without, including raw materials or best-selling products.
B: B items are important and you want to have some in stock, but they are not as crucial as A items. These may be products that do not sell as well or have a high margin.
VS : C items are your least important inventory items. They are worth very little, but they play a role in the success of your business.
ABC analysis can help your business control costs and identify the products most in demand. It can also help you negotiate with your suppliers. Since most of your income comes from Item A, 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 better ways to track this data in 2022. For example, an inventory management app lets you check the status of your inventory from your phone, tablet, or computer, all of which are likely nearby while you oversee the day-to-day of your business.
You can set up alerts to notify you if you’re running low on a specific item or if a product is approaching its expiration date. With the right software, managing your inventory and collaborating with your suppliers/vendors will become much, much easier.
6. Hire an expert to help you
If you’re having trouble getting your inventory under control, you might want to hire an expert to help you out. Consultants or logistics experts can objectively assess your business and help you develop a better strategy. You may also consider outsourcing your inventory needs entirely to a third-party logistics company.
Related: Using Technology to Build Supply Chain Resilience in a Changing World
Supply chain disruptions are inevitable and largely beyond your control, but you can better position your business to deal with them when they do occur by taking proactive steps today. By building a strong relationship with multiple suppliers, knowing your data, and using technology to manage your inventory, you’ll be able to navigate the ups and downs of the supply chain and, more importantly, ensure that your business can remain competitive.