A “black swan event,” such as the one we are experiencing now with COVID-19, is an unpredictable crisis that has potentially severe consequences. These are extremely rare and have a catastrophic effect on the economy. Retailers of every shape and size have to be aware of the long-term challenges of inventory management during these crisis events. Ignoring or overlooking what may lie ahead can lead to severe consequences. Businesses relying on antiquated systems and substandard forecasting tools may fail to overcome the hardships that these events can bring.
Protect Your Brand
Challenges with inventory become more apparent when a short-term crisis occurs. It’s the minor problems that have sprung up workarounds in your everyday operations that can lead to these challenges. You can overcome a minor issue or two, but when they overwhelm the system, it can be devastating for your business and your brand.
To protect your business, you need to avoid the pitfalls that companies of all sizes experience. Some of these inventory crises have affected high-profile big box stores, so many retailers can learn from their mistakes and avoid taking a hit to their brand.
1. Legacy Systems
One of the worst legacy systems that you may have in place is a manual one. These may be tracking a single category of products or a handful of others because your current system isn’t capable of handling them properly. Manual tracking of inventory has the potential for errors at every step. If you’re using spreadsheets to compensate for your inventory management system, then you need to upgrade it to a more comprehensive, robust system.
Antiquated systems are also a drain on your ability to manage inventory properly. These older systems aren’t able to process transactions quickly, and they don’t provide real-time inventory counts. They can also affect your customer service in a negative way by not providing the best experience possible.
2. Mismanaged Supply Chains
Striking a balance with your suppliers is vital for sourcing resilience, bringing down costs, and flexibility with order timing and delivery. You should work with your existing suppliers to create continuity plans that fulfill your inventory needs. But, you should also identify other suppliers to diversify your supply chain. This will act as a safeguard against shortages that arise from an economic downturn or other times of crisis.
Retailers, especially specialty retailers, face unique risks when their supply chains get disrupted. Roadblocks can delay products at crucial points during their journey from the manufacturer to your warehouse. A good contingency plan will address these issues and accelerate the movement of stock so your customers’ experience will never be affected. It may require some drastic measures to manage demand volatility, such as halting promotions, prioritizing products, and creating reserves.
3. Inadequate Reporting
It’s more challenging to overcome a crisis event if you don’t have access to accurate sales data, inventory trends, and customer behavior. Chances are you’ll have too much or too little inventory and experience the problems these cause:
Too much inventory ties up your working capital and reduces the flexibility you need.
Too little inventory leads to stockouts and lost customers.
Accurate reporting helps you forecast customer behavior and allows you to adjust your inventory to fit future demand. It also helps you negotiate better pricing and delivery with your vendors.
Better Prepared for the Next Crisis
You can weather a black swan event or other minor crises in the market by implementing a robust business continuity plan, as well as performing consistent technology updates. You can prevent costly inventory management errors that take away your flexibility to invest capital where it’s needed. This protects your business and your brand over the long-term.
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