Do you have too much working capital tied up in stock and still struggling with low availability figures? You’re not alone!
One of the main challenges in supply chain management is ensuring that your business has the right amount of inventory to meet customer demand while not tying up too much working capital in stock. Some may say that excessive inventory is a symptom of underlying problems in the supply chain, such as poor demand forecasting, long lead times, and inadequate supplier performance.
However, after the global pandemic, abundant safety stocks have been seen as an important tool for supply chain resilience. Most businesses increased their inventories in 2021, with a McKinsey analysis of almost 300 listed companies reporting an average 11 percent increase in inventory between 2018 and 2021, the most significant increases occurring in the high-tech and commodity sectors.
While higher overall stock levels may have become the norm, companies are now faced with the task of keeping inventory costs under control due to rising inflation. Carrying surplus inventory leads to both increased cost, such as storage, insurance, and depreciation, and waste, in the form of increased obsolescence or spoilage, which can lead to write-offs and further losses.
The increased waste is also an issue in terms of sustainability. In their lates e-book, Leading the Future Supply Chain: 4 keys to creating a competitive advantage in supply chain, Gartner points out that: “Increasing regulatory legislation and stakeholder pressure make achieving social and environmental sustainability critical to future-proofing business operations and addressing global sustainability concerns.” Therefore it is imperative for businesses to take the reins and achieve a better balance in their inventory levels.
In conclusion, having too much working capital tied up in stock can be a major challenge for businesses of all sizes. But by digitalising your processes and implementing Inventory Optimisation software, you can harness your data and use it to prioritize your time, efforts, and shelf space accordingly. It also provides better visibility of your inventory and a firmer grasp on Demand Forecasting and Planning, thus reducing the risk of overstock and associated costs. As a result, you’ll improve your overall financial health, better meet the needs of your customers, and reduce the carbon footprint of your operations.
Want to find out how AGR can help you free up working capital tied up in stock? Click here to book a discovery call with one of our supply chain consultants.