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From aisles with empty shelves during the initial lockdown caused by the COVID-19 pandemic to recent shortages of staples like baby formula, supply chain shortages have been an uphill battle for years. And yet, despite seemingly constant product shortages, many companies often struggle with a surplus of goods. In fact, major retailers have all uncovered have overcrowded warehouses and will likely resort to hefty discounts to make room for seasonal goods.
While crowded shelves can be the result of a variety of factors, such as B. Inflation and changing consumer behavior, supply chain teams seek to minimize costs by adjusting their planning strategies to better predict customer demand. Otherwise, businesses risk losing customers due to product shortages or making significant profits from discounts due to excess inventory. automation, such as B. predictive AI and machine learning technologies, is one way companies can streamline their supply chain operations, gain faster and more accurate insights, and better align supply and customer demand to avoid excess (or shortage) of inventory. Here’s how automation can help solve the current problem of excess inventory.
An inventory surplus crisis
Stock shortages have costly consequences for retailers and other organizations. However, overstocking inventory can have an equally drastic impact. Some large stores reported an increase in inventory, with staff feeling overwhelmed sorting through endless boxes of overstock. Inventory systems have also automatically ordered goods already in stock, indicating a lack of intelligent automation that accurately checks stock levels in real time and predicts when the right time to replenish is.
As excess inventory severely impacts retailers from both a financial and operational perspective, the mounting returns mountains only complicate the situation. Some large retailers are testing programs to do this Counting Customers to store their unwanted items to prevent more stock being dumped onto their crowded shelves and to reduce costly returns processing. With employees fed up, profits taking a toll, and operations in disarray, companies need tools that help them make strategic decisions and ultimately help them succeed.
Lack of accuracy in supply chain planning
Excess inventory is often the result of a lack of planning on the part of the organization. A study conducted by McKinsey & Company almost found that 80% of companies still use traditional sales and operations planning processes that involve little real-time decision making or automation. Most of their processes are based on unreliable data sources and outdated IT systems and have limited coordination between functions. Without the right tools to accurately predict supply chain disruptions and consumer spending, businesses will struggle to either replenish their empty shelves or, on the other end of the spectrum, eliminate heaps of excess inventory. Gaining end-to-end visibility across the extended enterprise is absolutely critical to preventing inventory over- or under-stocking, but this should only be the first step in the process.
It’s time to turn to supply chain automation
Businesses need modern, automated technology to help their supply chain operations move beyond mere visibility to predictive insights, intelligent automated processes, and continuous realignment between plans and execution. For example, digital twins provide a virtual model of the end-to-end supply chain. These tools leverage real-time ground truth data across the supply chain, predictive artificial intelligence modeling, machine learning, and process automation driven by business rules and thresholds. Digital twins enable companies to more accurately plan for shifts in customer demand, supply chain disruptions, financial risks and impacts on sustainability goals.
Because the supply chain ecosystem is made up of numerous partners, customers, suppliers, and other entities working together simultaneously, companies can share their digital twins with everyone in their network. This helps improve coordination between all entities within the supply chain, allowing for ongoing collaboration and communication to streamline operations. For example, a digital twin can indicate to a retailer and its supplier when there are unexpected local conditions that may prevent a shipment from arriving on time at its final destination. From there they can come up with a solution together, for example if a new route is necessary or if moving another delivery to a new location is the best answer. This ensures that companies order the right amount of stock at the right time and prevent extreme overstocking.
Whether it’s an excess or shortage of inventory standing in the way of a company’s ability to meet its goals, proper planning for supply chain disruptions can help it overcome these types of challenges. Automated tools like digital twins enable companies to meet increasing customer demands and exceed their profit expectations, while ensuring they are aligned with sustainability best practices.