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From aisles of empty shelves during the initial COVID-19 pandemic lockdown to recent shortages of necessities like baby formula, supply chain shortages have been a battle for years. And yet, despite the seemingly constant stream of product shortages, many organizations often struggle with a surplus of merchandise. Indeed, the major retailers have all revealed have overloaded warehouses and will likely resort to steep discounts to make room for seasonal goods.
While overcrowded shelves can be the result of a variety of factors, such as inflation and changing consumer spending habits, supply chain teams seek to minimize costs by adjusting their planning strategies to better anticipate customer demands. Otherwise, organizations risk losing customers due to product shortages or substantial profit from discounts induced by excess inventory. Automation, such as predictive AI and machine learning technologies, is a way for companies to streamline their supply chain operations, gain faster and more accurate insights, and better balance the supply and demand from customers in order to avoid excess (or shortage) of stock. Here’s how automation can help solve today’s overstock problem.
A crisis of surplus stocks
Stock-outs have costly consequences for retailers and other organizations. However, excess inventory can have equally drastic effects. Some department stores have revealed increased inventory as employees feel overwhelmed sorting through endless boxes of overstock. Inventory systems also automatically order goods already in stock, indicating a lack of smarter automation that accurately checks stock levels in real time and predicts the right time to restock.
As excess inventory has a significant impact on retailers, both financially and operationally, the accumulation of piles of returns only complicates the situation. Some big-box retailers are testing programs to Pay customers to keep their unwanted items to avoid adding more stock to their overcrowded shelves and reduce costly returns processing. With tired employees, heavy profits and messy operations, businesses need tools that can help them make strategic decisions and ultimately enable them to succeed.
A lack of precision in supply chain planning
A surplus of inventory is often the result of a lack of planning on the part of the organization. A study conducted by McKinsey & Company revealed that almost 80% of companies still take advantage of traditional sales and operations planning procedures that involve little real-time decision-making or automation. Most of their processes rely on unreliable data sources and legacy IT systems and have limited coordination across functions. Without the right tools to accurately predict supply chain disruptions and consumer spending habits, businesses will struggle to fill their empty shelves or, conversely, eliminate piles of excess inventory. Gaining end-to-end visibility across the entire extended enterprise will be absolutely critical to avoiding an inventory overstock or shortage, but it should only be the first step in the process.
It’s time to turn to supply chain automation
Organizations need modern, automated technology that helps their supply chain operations move beyond simple visibility to predictive insights, intelligent automated processes, and continuous realignment between plans and execution. Digital twins, for example, provide a virtual end-to-end supply chain model. These tools leverage real-time field data across the entire supply chain, predictive modeling with artificial intelligence, machine learning, and process automation driven by business rules and thresholds. Digital twins enable organizations to more accurately plan for changes in customer demand, supply chain disruptions, financial risks, and impacts on the Sustainable Development Goals.
Since the supply chain ecosystem consists of many partners, customers, suppliers, and other entities simultaneously working together, organizations can share their digital twins with all stakeholders in their network. This improves coordination between all supply chain entities and enables ongoing collaboration and communication to streamline operations. For example, a digital twin can tell a retailer and their supplier if there are unforeseen conditions in the field that may prevent a shipment from arriving on time at its final destination. From there, they can work together to determine a solution, for example, if a new route is needed or if moving another delivery to a new location is the best answer. This will ensure that organizations order the right amount of stock at the right time and avoid an extreme surplus of goods.
Whether it’s a surplus or shortage of inventory that’s hampering an organization’s ability to meet its goals, proper planning for supply chain disruptions can help it overcome these types of challenges. challenges. Automated tools, like digital twins, enable businesses to meet growing customer demands and exceed profit expectations, while ensuring they are aligned with sustainability best practices.