Some of the world’s biggest retailers and their partners are once again feeling the sting of “the bullwhip effect” – a term of art amongst supply chain professionals that describes how changes in demand at the retail level can reverberate and amplify issues throughout the supply chain.
For months, retailers have been stockpiling massive amounts of goods to meet surging consumer demand, and compensate for ongoing supply and logistics issues. (Just last year many were chartering their own cargo ships to get all these goods to their destinations.) Now, retailers find themselves carrying a glut of products as demand plummets in the face of pronounced inflation and widespread economic uncertainty. While consumers may see some short-term benefit in the form of discounted goods, many retailers have had to reset investor expectations, reflecting the expected hit on margins from carrying so much inventory.
Inventory management is challenging enough in normal times. But given more than two years of incessant and unprecedented supply chain disruptions, we may never see “normal times” again. So, what is it going to take to enable better inventory management? How do we create systems that allow everyone in the ecosystem, from suppliers to transportation partners to retailers, to be not only more agile and responsive in the face of rapidly changing market conditions, but to be able to predict issues in advance and prevent them?
Complete visibility into inventory. Better inventory management requires visibility at a granular level, down to individual orders and SKUs. And it requires visibility everywhere. What’s in manufacturing? What orders are planned versus in process? What’s stuck at the port? Is it in transit, and if so, what is its exact location and ETA? Is it sitting at the warehouse yard, or has it reached the store?
Having that SKU-level inventory visibility across the entire supply chain is critical to the ability to more accurately forecast supply and demand, and compress the time needed for all parties to make any necessary adjustments.
Integration with other key systems. Complete visibility requires us to break down the silos between various critical supply change management systems – e.g., warehouse management systems, order management systems, visibility platforms. By integrating order data, load information across modes, yard shipments and the like, internal departments can turn to a single source of the truth and more accurately manage various aspects of the lifecycle. Strategy and leadership teams might elect to be alerted to production line disruptions, for example, so they receive details about every impacted order. Transportation teams could drill into their top bottlenecks by facility, carrier performance, dwell time and volume. Inbound/procurement teams could view SKUs at facilities with low days of supply, and drill into orders in the yard with low SKUs.
All aboard. (International suppliers, we are talking to you.) Better inventory management – and supply chain management overall – requires that we not only break down silos between internal departments, but that we break down the silos between every link in the supply chain ecosystem. It’s not enough to be able to see and manage the inventory that’s currently in your control. You must be able to see everything, everywhere, including the inventory that is not sitting with you.
To that point, one of the biggest gaps in global supply chains today is the black hole that exists between international suppliers and the global shippers, transportation companies and retailers that do business with them. Too many suppliers are underinvesting in today’s digital transformation technologies and solutions. They should accelerate their efforts to modernize their operations and provide inventory visibility – and all the critical data that goes with it – to build 21st century supply chain management systems capable of managing unprecedented demands.
As I’ve underscored here before, more and better data, along with pervasive data sharing across the supply chain ecosystem, turbo-charges opportunities for collaboration and problem-solving. More supply chain companies sharing more real-time data creates richer opportunities for benchmarking, analysis, insights and collaboration to drive business benefits for all parties.
It is our greatest opportunity to not only better manage inventory, but to transform supply chain management overall from a largely reactive exercise, as it is today, to one of widespread interconnectedness and collaboration – where stakeholders at every link in the chain work together to predict and prevent so many of the issues bogging down our supply chains today.
Matt Elenjickal is the Founder and Chief Executive Officer of FourKites. He founded FourKites in 2014 after recognizing pain points in the logistics industry and designing elegant and effective systems to address them. Prior to founding FourKites, Matt spent 7 years in the enterprise software space working for market leaders such as Oracle Corp and i2 Technologies/JDA Software Group. Matt has led high-impact teams that implemented logistics strategies and systems at P&G, Nestle, Kraft, Anheuser-Busch Inbev, Tyco, Argos and Nokia across North America, Western Europe and Latin America. Matt is passionate about logistics and supply chain management and has a keen sense for how technology can disrupt traditional silo-based planning and execution. Matt holds a BS in Mechanical Engineering from College of Engineering, Guindy, an MS in Industrial Engineering and Management Science from Northwestern University, and an MBA from Northwestern’s Kellogg School of Management. He lives in Chicago.