As businesses navigate the unpredictability of modern markets, many are embracing centralized inventory control towers to streamline their inventory management processes. By consolidating data across networks, utilizing advanced analytics, and enabling real-time visibility, these companies are enhancing service levels, cutting costs, and transforming inventory into a profit center.
Inventory Optimization in Unpredictable Times
Effective inventory management necessitates the optimization of both stationary and moving stock. Overstocking can strain working capital, while stockouts can adversely affect service levels. In the consumer packaged goods sector, inventory optimization ensures sufficient raw and semi-finished materials for manufacturing, balanced goods at distribution centers, and appropriate SKU placement on retailer shelves.
However, the COVID-19 pandemic disrupted traditional inventory management strategies, leading to a 12% increase in excess retail inventory in the U.S. in 2019, amounting to $740 billion. This volatility continues to challenge inventory management approaches.
The Role of Centralized Inventory Control Towers
Centralized inventory control towers (ICTs) are emerging as the next generation of inventory management tools. They offer a combination of visibility, analytics, and automation. For instance, a convenience retailer established an inventory health “cockpit,” improving product availability and generating over $100 million in additional sales.
A robust data foundation is essential for end-to-end visibility and advanced analytics. For large companies, inventory data often resides in disparate sources. An ICT must accommodate this diversity to provide actionable insights.
Harnessing Analytics for Optimization
Modern enterprises require centralized ICTs to leverage descriptive, diagnostic, predictive, and prescriptive analytics for optimization:
- Descriptive analytics monitor the status and location of inventory.
- Diagnostic capabilities help teams understand underlying issues.
- Prescriptive analytics advise planners on redistributing excess inventory to meet demand at other locations.
- Predictive capabilities forecast delays and stockout risks.
The Need for Comprehensive Visibility
Advanced analytics must be paired with accessible and comprehensive visibility. Teams need analytics-driven insights, inventory snapshots for various timelines, and policy suggestions. Mature companies ensure that their ICTs provide real-time knowledge across the inventory landscape.
Successful Integration of Centralized ICTs
Successful integration of centralized ICTs requires addressing several factors. Change-management workshops and training sessions can help teams transition from traditional workflows to the new system. The capabilities must be flexible and customizable, allowing teams to easily embed new business rules or test predictive techniques.
Large companies with multiple internal business groups need a scalable ICT that replicates success across multiple settings. By embracing a centralized ICT, companies can navigate the complexities of modern supply chain management, driving efficiency and profitability even in the face of global volatility.
