You ask for it, you have it. Manage inventories without stress

Smart inventory management is more than filling shelves; It is necessary to anticipate what the market will demand, adapt to changes and protect the business from cost overruns or stock shortages that can frustrate a sale. At times it ends up becoming an art, that of combining often divergent views achieving a perfect balance. So that, at the end of the day, you have whatever you order at the right time, without losing money or affecting the customer experience. And that can only be achieved with a strategy that is flexible, intelligent and aligned with the needs of the business and the market.

The commercial perspective: anticipate, adapt and take advantage of opportunities

Let's start with the obvious: effective commercial management begins with an adequate forecast of demand and proactive management against deviations. The ability to anticipate needs, adjusting planning in the face of unforeseen changes, avoids breakdowns and maintains product availability at the right time. But what about opportunity purchases or “inventory investments” in times of shortage or restrictions?

Companies that have managed to develop this special sensitivity to understand market moments can only do so with solid management of their product categories, setting their inventory goals based on factors such as seasonality, recurrence or fashion, but also understanding the behavior of the market as a whole. The demand for certain products fluctuates depending on seasons, market trends or economic cycles; How much does each of these factors weigh at the time of our customers' purchasing decision? Deeply understanding and setting dynamic inventory goals based on these parameters is what will then allow us to better plan the purchase, avoid accumulations or shortages, and maximize the sales opportunity.

The assortment, depth and opportunity of inventory available per channel represents another challenge. The assortment strategy cannot be the same in all channels: an e-commerce with rapid turnover requires different inventories than those of traditional physical stores. Inventory management must adapt to the typology and behavior of the channel, ensuring that each one has the appropriate stock to capture the maximum business opportunity.

Finally, inventory rotation must be aligned with the product life cycle and the pricing strategy. A rotating inventory in line with said life cycle allows you to avoid obsolescence costs and guarantee efficient margins. Defining an appropriate pricing strategy, accompanied by optimal rotation, helps maintain profitability and free up capital tied up in products that no longer add value to the business.

The financial perspective: value, optimize and manage resources

But not everything is so easy: simultaneously with the commercial perspective, there coexists a financial perspective whose main focus is on evaluating the reasonableness of the immobilized capital and the opportunity cost that said immobilization represents. Sometimes financial reasonableness conflicts with business aspirations, and it is necessary to strike an appropriate balance that benefits the business as a whole.

Under this perspective, questions such as: At what price are we valuing our stock (last purchase price, replacement price, weighted average price, etc.)?; Are we properly considering all acquisition and nationalization costs in the valuation of inventories? And the cost of immobilized capital? What impact would it have to use inventories to “make cash” through commercial actions to obtain flow and leverage other investments?; Is the proportion that inventories represent with respect to the rest of the assets that make up the company's assets reasonable?

The operational view: reduce risks, maximize efficiency

From saying to fact...: after balancing the previous perspectives, we are left with the challenge of optimally putting into practice the entire logistics operation what “our excel” was able to calculate with agility and precision.

In this chapter the questions to be answered are: How to adapt our supply strategy to the particular characteristics of the supplier market in each category (purchase restrictions, lead times, delivery compliance levels, etc.)? How to efficiently align the operation of our warehouses and distribution centers (reception frequencies and hours, product conditioning times, etc.)? How to replenish our stores and distribute products to our customers, guaranteeing availability without breaking stocks (order points, routes, travel frequencies, warehouse occupancy limits, etc.)? How to quickly identify and act to reduce or eliminate obsolete or expired inventories? How to maintain 360° visibility of operations and inventory status to facilitate agile and predictive management?

A balanced approach to sustainable success

What is seen in some organizations is the figure of a planning role that takes into account all these dimensions and restrictions, and manages to define an optimized but possible operation. This role can be in any area within the organization, but it is important that it preserves an equidistance to take into account all perspectives.

At Paradigma we promote projects to transform these efforts by applying an approach of integrated views in a single work framework. Only in this way can a balance be achieved between availability, profitability and efficiency, allowing companies to remain competitive.