Life is easiest when we know exactly what products people want and when they want them. Unfortunately, we don’t live in a perfect world, and item demand is affected by increased choices, competition, product customization, and more.
There are several ways to prepare for erratic demand. Organizations may pick one method or combine various solutions to maintain desired inventory levels.
In this article, we’ll discuss:
- Buffers (stock and capacity)
- Reducing overall cycle time
- Customer collaboration
Buffers safeguard the end customer from the variability you’ll inevitably encounter in your supply chain. Without buffers in place, you may experience too much or too little inventory, resulting in lost sales or wasted stock.
A stock buffer allows for extra inventory to fill any gaps in your supply chain. If you keep enough inventory on hand, you can easily replenish the shelves when needed. It’s a simple, straightforward solution, but it’s also expensive and takes up valuable warehouse space.
Instead of arbitrarily ordering an abundance of inventory, planners should calculate an appropriate amount of safety stock based on data. Safety stock is a cost-effective way to maintain a desired level of service while reducing the costs associated with excessive inventory.
A capacity buffer can provide more flexibility for managing volatile demand. For organizations running their own supplies, opening an additional line or providing overtime for employees may be all you need to combat increased demand or quickly counteract a competitor’s sale. Also known as sprint capacity, this buffer can be used to quickly restore inventory levels after a delay.
Another approach to dealing with erratic inventory is to reduce the total supply chain cycle time. Through advanced planning solutions or process automation, organizations can reduce the total production and transportation time, which lends itself to better communication, especially with overseas suppliers.
Finally, collaborating with customers will ensure you have your finger on the pulse of their planned activities that could affect demand. If a customer is planning to run a promotion or is in an area where seasonal demand may spike or slow down, you need to know. Putting time on your calendar to check-in with customers at various points of the year will help you stay ahead of demand cycles, and be better prepared for fluctuations.