This article originally published on logisticsviewpoints.com.
For retail and consumer packaged goods (CPG) companies, the busy shipping season came early.
The peak inbound season typically starts around this time of year. But shippers looking to avoid disruptions and ensure that tight inventory levels don’t lead to missed sales opportunities pulled their orders forward. In the past month, imports — both ocean and air — surged as disruptions exacerbated congestion at the ports.
However, over-the-road transportation costs remain low. Cheap spot rates and rock-bottom contract pricing have been a welcome relief for shippers — albeit brutal for truckers — looking to preserve cash flow and protect margins in what many predict will be a higher-for-longer interest rate environment.
As companies look ahead to the next three to six months, they’re weighing costs, risks, and demand as they plan and adapt their inventory strategies. With so many factors outside their control — and a pressing need to be as efficient as possible — many companies are looking to improve their daily supply chain operations and decision-making rather than assume the plan they built six months ago will play out perfectly. To do this, leaders are increasingly focused on getting supply chain-centric information into the hands of people who need it to do their jobs.
Spurred on by the unique challenges of the pandemic, supply chains have digitized significantly in the past three to five years. And real-time order visibility is a critical component of that transformation, with leaders now looking to take the next step to gain true end-to-end insight into their supply chain.
With access to more accurate data, inventory planners can make more informed decisions about routing inventory through optimal ports, leveraging facilities like cross-docks and cold storage, and more — not only saving on the cost of transportation and storage on a per-unit basis but also optimizing inventory density within a network, which can lead to significant cost savings and operational efficiency.
Inventory strategies are increasingly focused on optimizing stock locations — what to hold and where, especially for inventory not immediately sold. Retailers and CPG companies are adjusting their supply chain strategies to delay the final positioning of inventory, allowing them to better meet regional demand without over-investing in warehousing. Companies are also making upstream decisions about which inventory to place on transport and opportunities to pivot to higher-priority items.
Key performance indicators (KPIs) central to these strategies include transportation and storage costs per unit, inventory density within the network, and utilization rates of storage spaces, aiming to increase the throughput per facility. These KPIs, along with the critical metric of days of coverage for inventory — which measures the balance between available stock and unfulfillable demand — play a crucial role in a company’s ability to efficiently manage supply chain operations and costs while adapting to business-specific needs and market conditions.
Given current conditions, one way retail and CPG companies can optimize their order visibility is by integrating their systems of record. Many companies have realized that their data lakes and homemade control towers aren’t providing the comprehensive overview they’d hoped for; although these systems enhance data richness within individual companies, they often struggle to incorporate and assimilate external data effectively due to a lack of standardization. This is exacerbated when supply chain partners delay data transmission, guard their data, or omit certain data fields.
Companies should continue to work toward improving data integration and standardization in the pursuit of actionable insights. Retail and CPG companies should use a combination of data from their Enterprise Resource Planning (ERP), Warehouse Management System (WMS), Order Management System (OMS), and Transportation Management Systems (TMS) — encompassing the entire order lifecycle from planning to delivery and incorporate a real-time visibility solution to monitor the impact of supply chain activity on order performance. This setup provides a more holistic approach than solely relying on TMS for tracking visibility, empowering companies in terms of order and load tracking as well as exception management.
Fully-integrated data can help companies track order status from before a load is tendered through when it’s being assembled in the warehouse all the way to final delivery. Ideally, companies will be able to gain detailed insights into what is being loaded onto trucks at distribution centers, whether trucks have been loaded or unloaded, and other pertinent details that impact order status.
This approach can also help companies plan outbound orders with confidence, leveraging data to anticipate potential disruptions and manage them proactively. Suppose a company’s supply chain system of record can not only record historical data but also project inventory needs and order ETAs based on both expected and real-time data. In that case, it will be possible to align inventory and delivery strategies more closely with actual market conditions and customer needs.
In an ever-shifting environment of consumer demand, shipping costs, interest rates, route disruptions, and more, retailers and CPG companies are becoming increasingly adept at optimizing order and inventory positioning. By combining tried-and-true systems of record with advanced data management, companies can set themselves up for an expected — and welcome — return to normalcy.
