Inventory management changes in response to e-commerce growth30/05/2023
Distribution, fulfillment, and inventory planning are gaining importance for retailers and logistics operators in efficiently managing and meeting customers’ growing and ever-changing demands.
Concerning these challenges, avoiding excess inventory and stock-outs are critical issues that operators must address to maintain accurate operational flow, as stated in Microsoft’s report "Optimizing Inventory Planning with the Snowflake Retail Data Cloud".
The main challenges: inventory planning and ROI improvement
The main challenges lie in inventory planning and improving ROI. In a commercial scenario where nearshoring vs offshoring competition is growing to satisfy customers more effectively, inventory planning is already a challenge. It is also accompanied by various needs such as excess inventory, product turns, and stock-outs. The report suggests that working with a data management system helps prevent complications and highlights successful cases of companies that reduced their out-of-stock rate from 20% to 7% by replacing their replenishment model.
Implementing an On-Time In-Full (OTIF) strategy based on this key performance indicator (KPI) information allows operators to minimize the risk of product unavailability. It enables them to improve customer satisfaction by providing shorter response times and continuous merchandise availability.
The report explains that "OTIF deductions for short or late orders erode profits and hurt the bottom line. At scale, mismanagement of this order-fill and on-time-delivery performance metric can cost a consumer goods company millions of dollars annually. Both suppliers and retailers lose revenue and customer loyalty." The solution lies in managing orders with up-to-date data to avoid out-of-stock situations and reduce delivery times.
Considering that OTIF claims can be raised by retailers up to two years later, putting the burden on suppliers to search historical records, utilizing an automated platform for data management allows supply chain managers to take quick action and avoid penalties. This includes making decisions such as:
Advanced data help improve risk management and customer service
Utilizing advanced data analysis to improve risk management and customer service not only ensures that suppliers have optimal material flow schemes in their logistics facilities but also enables them to meet the needs of their customers and enhance satisfaction among end buyers, thus increasing their loyalty while reducing operational risks.
Nearshoring is transforming the logistics landscape by relocating production activities, necessitating the adaptation of various stakeholders, including distribution operators, who must respond to the growing e-commerce demand. Rising costs and the need to meet shorter delivery times pose significant challenges for the supply chain, further compounded by the worldwide decreasing availability of logistics spaces.
As the nearshoring vs offshoring dynamics continue to shape the requirements for operators and demand for logistics spaces stabilizes, Frontier Industrial offers industrial land for sale and industrial buildings for lease in Mexico's main industrial areas to support the country's commercial exchange and economy. You can contact us to check availability if you plan to start operations in Mexico.