It’s no secret that the events of the last year and a half have impacted global supply chain in an unprecedented way. From increased demand in eCommerce to 2021 shortages due to COVID, there’s no denying that supply chain has changed. In the U.S., it’s currently difficult to get furniture, lumber, and chicken wings – and every day a new item gets added to the shortage list. In fact, one expert predicts that these shortages may last “well into 2022.” If supply chain disruptions are here for the long haul, there are many precautions and adjustments your business can make to ensure you are staying ahead of shortages and providing excellent service for your customers.
How did the world run out of everything?
The answer to that question begins long before the pandemic began. The practice of Just in Time Manufacturing (sometimes called “JIT,” “Lean,” or “Toyota” manufacturing) allowed companies to stay agile in ever-changing markets while minimizing stockpiles and maximizing profits. Just in Time can be an effective practice, but the events of the last year have put it to the test. Increased demand, shipping catastrophes, labor shortages, freak weather, and closed manufacturing plants in the wake of a global pandemic have come together to create one of the most perplexing supply chain phenomena in history. “It’s sort of like supply chain run amok,” said Willy C. Shih, an international trade expert at Harvard Business School, in an interview with the New York Times.
Of course, Just in Time is not to blame for the entirety of the shortage, and will continue to be a standard manufacturing practice after this storm has passed. Ken Eakin of Industry Week writes, “as cost-effective as JIT production might be, it is entirely insufficient as a provisioning system because it stops at the factory. Since the majority of the goods we consume in developed countries are produced halfway around the world, we’re not only reliant on the capacity of factories, but also on a giant global transportation and logistics network to provide us with the things we need in a timely way.”
What it comes down to is this: Supply Chain is complex.
There’s no cure-all or obvious answer for a crisis this extreme. But what we have learned is that not all supply chain practices thrive in extenuating circumstances. A recent survey by McKinsey said that 93% of the respondents plan to increase their supply-chain resilience in the coming months. For some, this looks like bringing manufacturing in-house or diversifying suppliers. Not everyone has the time, space, or money for those kinds of changes, but there’s three things you can do now to fortify your supply chain:
1) Adopting an Inventory Model that Works for You
In the Just in Case (JIC) inventory model, manufacturers reorder stock before it reaches the minimum level to continue to sell inventory while the suppliers are supplying the good. JIC keeps a minimum level of inventory in case of emergencies, which can lead to waste if inventory doesn’t sell or there are additional storage costs incurred. This practice can eliminate risk.
JIT and JIC both have their place, and many companies are considering adopting a hybrid of the two to increase resiliency in their supply chain. The first step to determining what model will work best for you is to do an inventory analysis and classify essential items, while determining how easy it is to acquire it. In a hybrid model, JIC can be applied to items that are quick to turnover while JIT might work for less popular items.
2) Increased Inventory Counting
A recent report from the White House noted retailers had 43 days of inventory in February 2020, where as today they have just 33 days. Less inventory on hand means there is also less room for error – it is vital that you know how much inventory you have and where it is being stored.
For this reason, many businesses are choosing to transition from a weekly or monthly inventory count to a daily count. The easiest way to count inventory is by creating a cycle counting process. Cycle counting is a popular inventory management technique where a subset of inventory is counted in specific locations, on specific days, on a recurring schedule. Cycle counting programs are created to replace once-a-year physical counts or to count specific items on a more regular basis.
Manual processes are truly the detriment of supply chain. By manually tracking inventory, your bookkeeping is never up to date. It becomes impossible to make proactive decisions about your inventory or the future of your business when you don’t have real-time visibility. If it seems like a cloud ERP or inventory management implementation would waste time and resources in a season where you are just trying to keep your head above water, this could not be further from the truth.
Last year, RF-SMART customer CentraCare went live on a cloud ERP in the midst of the pandemic. Recently, the RF-SMART team had the chance to go onsite with CentraCare to see their supply chain logistics operations. They faced many of the traditional challenges of any ERP implementation such as change management, testing, and the overall need for cross-functional coordination. COVID made performing these activities even more difficult than normal. However, CentraCare pushed through and was able to see increased visibility and accuracy in their supply chain almost immediately. This investment in technology has helped CentraCare as they continue to provide excellent patient care.
It's important on your supply chain journey that you find partners that can help you invest in technology. Warehouse Management companies like RF-SMART have years of experience that you can leverage to make decisions. Not only have we seen it all, but we are able to help all supply chain professionals with software, hardware, and 24/7 support.