How Better Inventory Management Leads To Better Partnerships

The critical role of inventory management plays in positive, mutually beneficial business relationships


Amazon and other online sellers have fostered an environment in which customers now demand faster, more reliable shipping, and when they visit a physical retail outlet, they expect to find what they want - immediately available and in stock.

The desire for instant gratification is not new, of course, but the consequences of being unable to respond to it are primarily down to the evolving Internet culture. Though the connection might not be obvious, one of the most crucial factors in being able to deliver instant gratification is the quality of your inventory management procedures, not to mention those of your suppliers.

More companies are now realizing the critical role this function plays in positive, mutually beneficial business relationships.

Changing Penalties

As WaspBarcode points out, big-box retailers such as Target and Walmart have stepped up their game. They’re demanding more from their suppliers.

Target, for example, has eliminated its previous two-to-12-day 'grace period' for late shipments, and increased late fees to about 5% of the total order price. Suppliers can also be fined between $5,000 and $10,000 for orders that are incomplete or inaccurate.

Walmart also has instituted new penalties and changes, which reduce its delivery windows from 1-to-4 days to 1-to-2 days, and increased its target for on-time deliveries from 90% to 95%.

Admittedly, stricter penalties aren’t the best way to maintain a smooth relationship with your suppliers; nor is frequently missing shipping targets the best way for a supplier to build a long-lasting partnership with major corporate players.

Instead, both parties need to integrate their inventory management systems better, and utilize big data, better scanning technology, and mutual accessibility via the cloud, to preserve their working relationship and ensure that end customers enjoy the instant gratification they crave.

Why Inventory Management Is So Vital

Inventory management may seem like little more than an insurance policy, to keep records and evaluate product loss or processing efficiency. Thanks to big data and today’s technology, however, inventory management is also worthwhile for:

- Communication. Thanks to the cloud, suppliers, vendors, and customers can all mutually access the same information. When a box is scanned for shipment, customers are instantly updated with the knowledge that the shipment is going to make it on time (or not). The speed of transactions and the accessibility of the data also enable more efficient internal communication.

- Predicting. When paired with intelligent predictive analytics, the data you gather through inventory management can be used to project your customers’ needs accurately, and ensure your production team is ready. That will please your customers and keep your partnerships operating smoothly.

- Improving. Looking back at your historical data, and performing root cause analyses for anything that goes wrong, can help you learn from your past mistakes, identify potential areas of growth, and design a better business. Adapting to market demands and lowering costs is good for everyone in your supply chain.

The Four Stages of Effective Inventory Management

Here are the four stages of inventory management that your system must address:

1. Gathering. Employing barcodes or similar technology, you can gather data in an automated fashion. Instead of entering location information on a spreadsheet, you can instantly record rich data such as location, contents, and product details and instantly upload it to a centralized cache.

2. Accessing. The data will then be available to all interested parties, including your company and your partners (if desired). Generally, the more transparency you offer, the better, though there may be some information you’ll want to keep private.

3. Analyzing. There’s a reason why demand for data analysts is increasing. It’s nice to have ample information on your supply chain, and even better for all interested parties to be able to access that data, but what can you learn from it? Analysts will be able to help you predict future events and make changes to your current procedures that better address your needs.

4. Acting. Your conclusions won’t mean anything unless you can put them into action. The last step is a commitment to use your new information to make improvements, one way or another.

If your firm is able to establish efficient processes for all four of these stages, and remain consistent in execution, you’ll be able to exceed expectations consistently, and ensure both your partners and your end customers are fully satisfied.


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Procurement Management Guide