Navigating inventory through the eye of the COVID storm
Supply chain executives are thinking hard about how to manage and move inventory in tricky times
In a recent roundtable, Reuters Events: Supply Chain sat down with supply chain executives to understand pain points and solutions around fulfilment and a common theme began to emerge: Strength in diversity.
This might be diversifying locations for holding stock, production facilities or modes of transport, or all of the above, as COVID-19 has shown that there are significant costs and complications to suddenly being over-reliant on any one link in the supply chain.
Chasing to keep up
According to several executives on the roundtable, failing to have inventory in the right place at the right time can have a massive impact on company performance, as sales are not realised when product cannot meet local demand.
For consumer hardware manufacturer Tricam, they were “Were already facing challenges with our supply chain and imports” as “almost all of it is made in China,” the first country to be hit by COVID-19 noted Andrew Larson, the company’s Fulfilment Director. “By the time things came over into the US, we saw a couple of weeks where we thought sales were going to plummet, and then everybody seemed like they took up home improvement projects with the stay-at-home orders and sales just skyrocketed. So, in some cases we've been chasing ever since. Partly because we didn't have the supply in place coming in, and then we've had some of our business skyrocketed [in a way] that we cannot keep up.”
James Hargett Senior Operations Manager of men’s clothing brand Chubbies agreed that “inventory [is] chasing to meet the e-commerce demand,” leading to a “struggle to keep up with the outputs,” especially as “we've had a shift in shopping behaviour as far as when orders are placed as well, with the weekends becoming a really, really heavy time for us.”
Alongside shifts to the timings of peak demand, “The other challenge we have … with a lot of these retailers [is] channel shift,” said Larson. “A lot of this demand … is shifting … as far as 70% online, 30% in store, things like that. I don't think the retailers are still getting a handle on that.”
In an environment where consumers are rarely in a mood to wait and have been trying alternatives in this crisis, brands need the right inventory in place as often as possible. This makes it imperative to try and create a diversified supply chain network that can roll with the blows and be adjusted in relatively short order to handle variations in demand levels, timings and locations.
A prime example is the transportation network you utilise.
We have seen massive disruption to the usual patterns of ship, aircraft and even truck movements since the start of the pandemic. Therefore, it is vital to be able to understand your net costs and margins, and then make a call on fulfilling this through alternative means when your usual mode of transportation goes under.
For Gary Bravard Co-Founder & VP of Adore Me, it was a case of needing inventory to arrive in time despite the cost, pushing them to use “Air freight, which we hate to do, because it's not green, but we had to use air freight, which helped us save a month or so on future deliveries.”
Sporting goods brand Amer Sports found themselves investigating new modes of transport, turning to “Train as a sustainable inbound transportation mode, because it reduces lead time and the costs are in the middle of ocean and air…. Flexibility is key to find the right balance between the needs for speed, agility, cost and service,” said Senior Director of Operations Gundl Herzog.
They are not alone as there has been a big growth in rail freight and in intermodal transportation since the start of the year as companies try to cope with challenges.
Hargett agreed that it is a case of “Trying to understand what our logistics mix is [by] not just looking at it in a binary air versus vessel but are their premium vessel options – fast, special options that are cost effective for the business, but also get us goods when we need to meet the sales demand?”
Hargett also noted that it is important when more expensive options are the only option to focus “on driving profitable sales to the website.”
Strength in diversity
Looking further upstream, many are also awakening to the need to diversify production partners.
Bravard found himself reaching “Out to other manufacturers to know if they had the ability to give us more production … and be able to produce faster and using ultimately less resources.” However, “it's really reactive” as it is “a very long timeline in order to produce a new bra – sometimes up to a year from the elementary designer to the roll out.”
For Rachel Thaw Customer Experience & Logistics Manager / CEO of swimwear brand Andies Swim their experience has been to take advantage of the small and agile nature of their production requirements. “I would say that we've had increased ability to negotiate with factories overseas, because many of them suffered many cancellations and very large PO reductions from typical big box places.”
Then at the other end as the product gets distributed, “what we're seeing is more of a decentralized approach,” said Brian Southwell, Vice President of Business Development and Marketing of 3PL Taylored Services, “where [customers] are not dependent on one facility or one specific 3PL.
“They don't want to be in a situation where if they have some sort of outbreak in Columbus, Ohio, for example, and their distribution centre has to shut down, that they're completely dead in the water.” Instead they are looking for “some sort of contingency plan, that's flexible in the sense that it's not going to take them 12 weeks to get back up and running where they can divert freight almost immediately.”
So, if you haven’t already thought about introducing more diversity into your supply chain in order to build capacity and resilience, now is the time. After all, “You don't want to waste a good crisis,” says Thaw.