Inbound Logistics | January 2025

8 SEGMENT INVENTORY Many companies settle on a level of inventory—for example, 45 days of inventory on hand—and it becomes a sort of “urban legend” for all its products, says Ingrid Gonzalez McCarthy, vice president, supply chain planning with Gartner. The problem? “This just assumes all products are the same,” she says. Companies need to segment inventory based not only on value, but also on lead- time volatility. For items with stable lead times, companies generally incur little risk if they plan for a minimum inventory level, McCarthy says. Conversely, for high-value products with unstable lead times, companies usually can lower risk by having more stock than normal. 9 DEVELOP AN OMNICHANNEL FULFILLMENT STRATEGY Companies that lack an omnichannel fulllment strategy often struggle to meet demand when one distribution point becomes overwhelmed. Using multiple channels, such as in-store fulllment and multiple warehouses, helps ensure that orders can be fullled exibly and efciently across various points. This reduces stress on any single channel.

10 BUILD STRONG RELATIONSHIPS Solid relationships with customers and suppliers can help companies meet demand surges. OMNI Systems, a large private-label U.S. manufacturer, “carries more raw material than many of its competitors,” says Mike Murton, president and COO. This enables OMNI to tackle last-minute orders. When deciding on inventory levels, OMNI partners with its customers. “We work hand-in-hand with the customer to make decisions that work best for both organizations,” Murton says. OMNI has built similarly strong, long- term relationships with its suppliers, often sharing data on sales and new business opportunities. Partnering with them and “creating that full circle” linking the customer, OMNI, and the supplier to share information helps all meet demand, Murton adds. 11 CREATE A DIGITAL TWIN TO ASSESS HOW BEST TO CALCULATE BUFFER STOCK Creating a digital twin, or virtual representation of the supply chain, and then building real-time models, is a smart way for organizations to conduct simulations. This is more effective than

optimizing for each function, such as logistics, production, warehousing, and other areas, which can result in the addition of multiple buffers, boosting costs, explains Dave Petrucci, global leader, supply chain and operations with Protiviti. Simulations done at the enterprise level tend to be more efcient and responsive. In general, it makes sense to optimize inventory levels at the system level. However, as expectations for lead times get tighter, and as demand- sensing tools become more focused on localized demand, having buffer inventory available at the system level may not be adequate to react quickly to local changes in demand. “Buffer is often considered a four- letter word in supply chains, but ‘lost sales’ can be far more damaging to a brand,” Petrucci says. Companies need to consider the trade-offs. 12 RATIONALIZE SKUs Eliminating obsolete or dying inventory items in a warehouse or distribution center helps create room for the products that really matter. When demand jumps for a specic item, it’s easier to move orders out the door. 13 TRY NEARSHORING Over the longer term, nearshoring can shorten supply chains, helping companies respond more deftly to demand uctuations. But switching to nearshoring is not a simple x, as many components and raw materials currently still come from Asia. Supply chain organizations in other parts of the world need to look at the end-to-end process and all materials involved when deciding whether and how to nearshore. 14 PLAN FOR THE RESPONSE Few forecasts will be perfect. As a result, organizations need to invest in their response capabilities, says Bornino. This includes the technology solutions and management processes essential to build an infrastructure capable of supporting a quick response to demand spikes. ■

OMNI Systems, a large U.S. private-label manufacturer, counts on long-term relationships to help it manage demand surges. By sharing sales data and partnering on inventory strategies with its suppliers, OMNI is able to make decisions that work for both organizations.

124 Inbound Logistics • January 2025