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Balancing inventory in the post-covid world is difficult, but a leaner management style can make it work.
In Q2 of 2022, supply chain inventory growth averaged 46%. In apparel and ecommerce sectors, that number was considerably higher at 66%.
The past three years have been a wild ride. 2020 and 2021 brought inventory shortages as consumers rushed to stock up on essential items and the supply chain was disrupted by covid-19.
Then, in 2022, as the average consumer was being rocked by inflation, a wave of inventory that had been stuck on ships during the supply chain crisis hit the American market all at once.
Suddenly, companies were sitting on a giant pile of merchandise when people were cutting back on everything but essentials, a situation that the managing director of Strategic Resource Group labeled a “retail armageddon.”
“I think it’s going to be awhile before merchants and executives are really ready to place that bet for a large inventory position. Those conversations were brutal last year. The earnings — they weren’t fun calls, and I don’t think anyone wants to go back to that time.” - Matt Garfield, Managing Director of FTI Consulting
The supply chain is slowly balancing itself out in 2023, but not as fast as many retailers would like. The low to moderate income consumer still has less purchasing power, and inventory is only decreasing gradually, still sitting very high in the manufacturing and wholesale sectors.
So, how can companies avoid overstocking and excess inventory?
Experiment with a just-in-time (JIT) inventory management style - With JIT, you order and receive inventory only as needed, reducing the risk of overstock. This approach helps keep inventory levels lean and minimizes storage costs.
Track customer insights to stay on top of inventory needs - Stay closely attuned to your customers' needs and preferences. Gather feedback and monitor market trends to help you make informed decisions about what to stock and in what quantities.
Consider a cloud-based inventory management solution - Cloud software solutions offer real-time inventory management tools that can help you make rapid adjustments to your ordering and inventory levels. Traditional pen and paper management still used by many enterprises cannot achieve this.
We’re still facing many challenges in the modern supply chain. Not all solutions are going to work for everyone. However, there are best practices and technologies that, when combined, can help you navigate choppy waters.
Is there a specific combination you’ve found to help you manage excess inventory?