On Demand News: 08/18/20

Inventories Get Some Out Of The Box Thinking

Spurred by COVID-era supply strains, innovative strategies accelerate for inventory management. 

18 August 2020 // Sometimes it takes a pandemic for people to help make a point. 

For years now, we have talked about the tradeoff between managing for optimal inventory versus optimal availability. Typically, those goals compete against each other. Increase stock on hand, and your inventory costs go up.  Minimize inventory carrying costs and and the risk of lost sales due to stock-outs rise.

So, we were glad to see the Wall Street Journal headline earlier this month, “As Inventories Swell, Companies Turn to Novel Strategies To Get Through Coronavirus Crisis.” (subscription-based access). The story reports that recent supply chain challenges have forced manufacturers to go beyond the basics of vendor-managed inventory and just-in-time deliveries.

New tactics “include tapping firms that specialize in buying and holding inventory for other businesses, as well as more traditional measures such as borrowing against inventory,” the story says. Channel Capital Advisors’ Steve Box tells the WSJ that companies “want to get as much liquidity as they can to get through this period and beyond.”

In our experience, some of these ideas just paper over a problem. Borrowing against goods, for instance, can be little more than the corporate equivalent of a payday loan. 

At Morgan, we see ‘inventory versus availability’ not as a burden to be managed. Rather, it’s an opportunity for transformation. With our own Inventory On Demand™ service, Morgan can buy goods on behalf of OEM clients at the factory or supplier dock and own them right up to the point of consumption. 

That holding period is an opening to increase efficiency, whether that comes from consolidating shipments, shifting modes or redrawing distribution locations. So, while inventory holding has a financial cost, optimizations can mitigate those expenses—and provide gains in customer satisfaction and supply chain resilience.

So much of life comes down to difficult choices: Save or spend, grow or profit. It’s good to know that the world is realizing in the question of inventory or availability, the answer can be both. Too bad it took the meltdown of COVID-era supply chains to prove it. 

Need a supply chain review? Contact us for an assessment at no charge. 

Heard On The Dock

“Companies want to get as much liquidity as they can to get through this period and beyond.”

--Steve Box, Channel Capital Advisors, describing the push for new, innovative inventory management strategies.

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