How Distributors Can Be More Proactive About Inventory Management

Over the past few years, distributors have seen unprecedented challenges. From labor shortages to extended lead times to totally unpredictable supply and demand, inventory management has been difficult to say the least.

We’re not out of the woods yet.

That’s why many distributors are thinking more intentionally about how to be more proactive about inventory management. There are some good reasons for taking a more assertive approach.

What is driving distributors to be more proactive?

Many distributors are still reeling from the pandemic years when everything felt unknown. In particular, the unpredictability of customer demand and unpredictable lead times presented real hardship. Many distributors were caught without access to the items their customers wanted or were stuck with too much inventory after buying up more than they needed.

The increase in demand for omnichannel support has also made inventory management—and the need for systems to talk to each other—more challenging.

In a recent survey Sikich conducted with Modern Distribution Management, more than 71% of distributors said they felt they could be doing better at their current inventory management practices.

What does it mean to be proactive?

Savvy distributors want to avoid repeating the problems of the past few years and plan ahead with better forecasting, improved data and stronger communications.

Here are some examples of what it means to be proactive when it comes to inventory management right now:

• Start tracking inventory data in real time. Distributors will find that tracking inventory data in the moment, rather than relying on historical data, can make a big difference when it comes to serving customer needs. Real-time inventory tracking data can help you adapt when needed and avoid the scramble and supply the right items to the right locations at the right time.
• Improve communication with suppliers. Rather than reacting in the moment, practice proactive communication. Sometimes called vendor performance management, proactive communication is critical to establishing mutually beneficial relationships between vendors, distributors and customers.
• Invest in better forecasting. A key step to better forecasting is to embrace data. Use the tools available to you—or invest in more efficient methods—to configure optimal inventory replenishment based on demand, current inventory levels and projected fluctuations.

The costs of not being proactive in distribution

Taking more farsighted steps toward better inventory management isn’t just a nice idea. Neglecting to act now can result in real costs to your distribution business down the line.

These costs might include:

• Lost sales. You could risk losing sales if you don’t have the right things in stock at the right location at the right time. Being proactive can help you achieve financial goals and avoid feeling like you’re always trying to keep up.
• Customer dissatisfaction. For example, if you suddenly find yourself facing longer lead times than you expected, customers can feel frustrated and hesitant to order from you again.
• Lower profitability. For example, you may be carrying too many items that aren’t moving. Conversely, you may be scrambling to get product to customers last-minute due to poor planning or lack of visibility, and the resulting cost to deliver is higher.

There are true costs to not taking a proactive approach. Not only does it leave you feeling like you have less control, but it risks continued unpredictability and instability in your business.

A proactive approach is a win-win for your business and your customers

Being proactive should be a mindset shift, taking into account all the ways your distribution company can benefit by tracking data, improving communications and investing in accurate forecasting.

To learn more about how you can stop reacting and start investing in your operation’s success, contact one of our experts and schedule a consultation.