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Inventory Management / Optimisation
Inventory Management / Optimisation
5 min read

Demand Variability – Risk or Opportunity?

Adam Cavanagh
Published on:
June 10, 2021
Unpredictable patterns of demand create challenges for managing inventory. These primarily manifest themselves in either excess inventory or issues with fulfilling service levels. 

Demand variability is a constant, there’s no way to predict with absolute certainty what’s going to happen to the market in a ‘normal’ year, let alone foresee bigger challenges like we’ve seen in the last eighteen months. But what we do know is that no matter how much trading dynamics fluctuate and vary, the businesses best placed to respond are those who can flex their plans. When new insights become available, these are the organisations that will take action to turn risks into opportunities.

Here are five steps you should be taking to maximise the potential of whatever the market decides to do:

Think agile

Circumstances only become risky if you are stuck with a static approach and are unable to respond to them. If you can work with agility, all risks become opportunities to create competitive advantage. 

Businesses with inflexible processes and outlooks may struggle, but those that can be agile are able to run leaner and deliver better service levels, leading to happier clients. Tackling demand fluctuation from multiple angles increases your resilience to absorb any bumps in the road. 

Expose your blind spots

Being agile requires visibility across the length of your supply chain. To understand product performance, demand patterns and gain valuable end-to-end insights – along the value chain of supplier, to retailer, to customer – you need access to a single point of as close to real-time data as possible

Having this overview allows you to identify any current pinch points or areas that will leave you exposed to risk emerging from demand variability. With this insight you can rectify any issues or create plans which take them into account, minimising your potential weak points. 

Respond quickly

Having access to all the data and the insight it can provide is only valuable if it is available in real-time (or close to). If the information all exists in core systems but must be manually extracted, entered into spreadsheets and then manipulated to create any form of actionable intelligence, that process is unlikely to be run frequently. 

It doesn’t matter how full a picture you can create as a business if you are only generating it on a monthly basis. You’ll have excellent insight for a couple of days of the month but the other 29 or so you’ll be left with blind spots as the insight you’re working with becomes outdated. The best organisations have the power to dynamically analyse their data and use the insight to drive decision making at any point in the month, working from a centralised information source.

Maximise your planning potential

All the functions of your business need to be pulling in the same direction and working to the same end goals. If planning, sourcing, replenishment, logistics and account management are all operating from a shared plan with clear objectives, the potential for confusion or disruption emerging from demand variability will be greatly reduced.

Rather than remaining reliant on spreadsheets and outdated snapshots, you need access to a near-time view of all activity that automatically prompts planners, buyers and the rest of the team. This forecasting and demand planning potential will equip you to respond more efficiently and effectively to variability. 

Apply robust governance

Too many rules in place can create constraints and slow processes down but without any you are likely to face chaos. Establishing solid S&OP processes which factor in inventory optimization through product life cycle management leads to visibility on demand across your entire operating model and minimises the risk of carrying excess stock. 

Integrating robust governance with a data-driven approach built on the foundation of a system driven by automation enables better decision making in the face of any uncertainty in the market, with the opportunity to gain a competitive advantage. 

As the economy recovers and the marketplace adapts to life beyond Covid-19 there will continue to be unexpected shocks, opportunities and disruptions.

Recognising risks as they emerge and creating the appropriate controls and processes to mitigate them will allow you to turn uncertainty into opportunity. Let us show you the impact that the AGR software can have on your ability to capitalise on these chances – get in touch today to see just how much of a competitive advantage it could give you.