Two years into the pandemic, the global supply chain continues to affect retailers as news of clustered ports, record freight rates, and other disruptions make headlines. As retailers struggled to receive inventory to sell to their customers in the early stages of the pandemic, they continued to buy more and more merchandise.
The situation was especially difficult for businesses with complex supply chains, as their production and transportation of goods were vulnerable to disruption due to shortages of inputs from other companies. In many ways, the COVID-19 pandemic exposed the degree to which our global supply chains are fragile in responding to unexpected changes in demand.
Now, as life is starting to flow normally again and with consumer behavior fluctuating with market conditions, some companies are having the opposite issue- too much inventory and not enough turns- leaving companies considering how to house inventory they were not expecting to hold.
In the end, retailers with a balanced and well-planned inventory on hand when the pandemic hit were at a significant advantage over those who relied on a continuous flow of deliveries. This inventory offered the opportunity not only to continue to provide goods to customers but also to have a chance to acquire new customers if competitors were not able to provide those goods.
The scale of the COVID-19 disruption was both unexpected and catastrophic to some industries. While that type of disruption does not occur regularly historically, the reality is that troubles are inevitable, and retailers may need to rethink their approach to inventory.
So, what about the retailers that can hold inventory in light of these issues? Some may prefer overstocking merchandise to avoid negatively affecting revenue due to insufficient stock on- hand.
Holding inventory also means that retailers can ship to their customers with an improved on-time delivery rate by eliminating some unknowns. While lockdowns have hopefully passed us by, the disruptions continue to ripple through our supply chains, whether the products are produced domestically or overseas.
In today’s environment, retailers with a large inventory can adequately handle any unexpected consumer demand. Companies may also address any mishaps with suppliers failing to deliver stock on time. With delayed inventory from the ports, retailers carrying large quantities can still operate under normal conditions.
Additionally, the risk of production shortage and the order cost are reduced. When a company runs out of a particular type of inventory, it may no longer be able to manufacture its products until the stock is replenished. Holding inventory makes it easier to keep up with manufacturing demands.
For retailers in essential industries, what is stocked may be as important, if not more, than how much is on hand. We are seeing an increased need for parts and maintenance. Demand for whole goods in transportation and manufacturing has outpaced supply and will continue to do so in the short term, so taking care of what is in place has never been more critical.
Though the pandemic has changed the course of inventory management practices, strong retailers remain. And until the supply chain can regulate back to a more typical pace of operation and address weaknesses that are now very apparent, those retailers who can retain the correct inventory will see a significant advantage.
Shawn D Gallagher serves as the Director of Operations for Silver State International and Peterbilt Truck Parts & Equipment. Both full-service dealerships offer Sales, Parts, Service, Collision, IT, and Lease and Rental needs. The parts departments provide multi-million-dollar inventories that offer a wide variety of proprietary and all-makes parts, including Peterbilt, International, Cummins, and Caterpillar lines. The company is committed to being a valuable inventory resource for their customers.
