Reference no: EM133985814
Assignment:
Inventory Planning: Forecasting During Uncertainty
By: Chris Femia, Managing VP
COVID-19 has unleashed unprecedented consumer demand and exposed fractures in the just-in-time supply chain model.
In the span of just a few months, your supply chain may have changed drastically. Supplier shutdowns in China. Increased shipping demands. Decreased working capital. These evolving conditions impact your go-forward inventory strategy.
Forecasting inventory requirements have always included a mix of past trends, sound predictions, and supplier relationships. But the uncertainties we are facing right now make this process more challenging. This includes
- Evolving consumer demands
- Product availability, and
- Predictable transportation
Let's look at these inputs and how they may impact inventory planning.
Uncertainties in Consumer Demand
Consumer demand is on a roller coaster and the ride doesn't seem to be slowing down soon.
Shelter at home requirements have led consumers to stock-up on food while alcoholic beverages are seeing massive sales spikes. Online shoppers are buying bread machines, household supplies, and fitness goods (Links to an external site.). Other categories are seeing sales plummet, like luggage and store fixtures.
Supplier Uncertainty
While some items in your warehouse might need higher inventory stocking levels, you may need to diversify your supply sourcing strategy to meet demand and service level agreements.
Your current suppliers may be able to help you with some creative solutions. Here's an example of how:
Your supplier may be able to repackage a 25 lb restaurant-size sack of flour to 5-pound sacks designed for general consumers.
Other items, like Personal Protective Equipment (PPE), have global supply chains that could see continued disruptions as countries scramble to ensure that medical personnel have the equipment they need.
Transportation Disruption
Shipping and transport times are another key factor in determining when you'll have the inventory in your warehouse to meet customer demand. From port issues to internal transportation changes, you may need to revise forecasts daily to better manage lead times from transportation vendors (Links to an external site.).
Open, frequent communications help you manage your transportation partners. This transparent communication gives you visibility into disruptions and keeps a channel open to ensure your partners understand your priorities, and where needs are and are not being met.
You may also want to evaluate your transportation network. While you may not have capacity to perform a full network analysis, there are some reviews that can be done on inventory and SKU profiles.
Questions:
- What are the different problems faced by companies?
- How will this impact the inventory management and control? Discuss individually.
- Can this be solved using deterministic models of inventory? Why or Why not?
- If you are an Inventory Manager of the company, how will you solve each problem?