April 26, 2024

    Inventory Visibility: Why Distributors Can’t Stay in the Dark

    In a recent survey of 100 distributors we did with Modern Distribution Management, 82% rated their inventory visibility as good or excellent. Perhaps some of that optimism stems from the relative stability of the supply chain after a few years of turmoil, but still, it’s nice to see a show of confidence.  

    What about the other 18% who rated their inventory visibility as fair or poor? What are they missing?  

    For decades, inventory management required so much manual tracking that real-time visibility was impossible. Now, technology can help distributors stay on top of their inventory. If your organization isn’t taking advantage, the opportunity costs could be significant. 

    Inventory visibility benefits 

    Distributors tend to have massive catalogs and large SKU counts to keep track of. Greater inventory visibility enhances your organization’s operations both in the short term (because you can detect and address urgent issues more quickly) and in the long term (with improved best practices).  

    With better inventory visibility, you can: 

    • Track inventory levels in real time, which, in turn can give your customers more reliable information on product availability and delivery times, reducing the risk of stockouts or delays.  
    • Identify slow-moving and excess stock, allowing you to adjust your reorder points and streamline processes to lower carrying costs for products that don’t fly off the shelves. 
    • Pivot on the fly. When you know the status and location of every order, you can adjust, reallocate resources, and optimize delivery routes as necessary.  
    • Improve collaboration and greater operational efficiency all along the supply chain, from production through order fulfillment. You can reduce lead times with vendors while making your warehouse layout and picking processes more efficient.  

    The big-picture effects are significant, too.  

    In some industries, there are specific regulations that require accurate inventory records. Real-time visibility helps you stay compliant without headaches.  

    And on a market level, understanding what you have, what’s selling, and what isn’t, will give you clearer insights into customer preferences, demand patterns, and overall trends. When conditions change suddenly and trends change with them, you can respond and adapt far more quickly than if you’re playing catchup with your inventory.  

    Managing expectations around inventory visibility  

    While the benefits of improved inventory visibility are substantial, it’s important to manage expectations, especially when it comes to the big picture.  

    For example, many distributors want to use their inventory visibility to be infallible at demand forecasting. Or, when they realize that there’s always a margin of error, they figure that there’s no point in forecasting in the first place. But even with error present, demand forecasting is well worth the effort, as long as you’re aware of your error level and try to keep it below the threshold for accommodation.  

    When it starts to creep beyond that threshold, you can still gain valuable information — there may be a significant shift in demand that’s causing the error. Having visibility means you can measure the deviation from expectation, and once you’ve measured it, you can make inventory adjustments accordingly.  

    In other words, inventory visibility is a powerful asset, not a panacea. Collecting and using data is essential to any distributor’s business, and inventory visibility means you have the tools and skills to do so at a higher level.  

    Tracking KPIs 

    A 100% fill rate is not always feasible, so keeping track of how often you do manage to successfully fill orders will give you a baseline and help you set an achievable goal. Service level is also easier to correlate back to your inventory position, and when you track it over time, you can identify what caused a failure to fill, such as a shortcoming in supply.  

    It’s also a good idea to get more granular with your KPIs and track them at the item, category, and product levels. The more KPIs you track, the more correlations you find, and the more you’ll be able to make the necessary adjustments that lead to growth.   

    Enavate can help you get the visibility you need 

    We work with distributors to leverage technology to improve how they collect, use and view inventory data with Microsoft Dynamics 365 Business Central. Watch our recent webinar or reach out to our expert team today to learn more. 

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