New Thinking About Inventory Helps Companies Address the Classic Supply and Demand Dilemma

New Thinking About Inventory Helps Companies Address the Classic Supply and Demand Dilemma

The greatest challenge many businesses, big and small face, is knowing how much product supply is enough to meet customer demand. Retailers experience that dilemma each holiday season as consumers flock to online and traditional brick-and-mortar stores. Manufacturers most recently faced this phenomenon during the 2020 global pandemic as they struggled to navigate reduced supply because of supply chain disruptions.

The principle of supply and demand is becoming more sophisticated, with new methods that are enhanced through technology like inventory optimization being used to more closely match customer expectations. The concept of inventory optimization allows a company to calculate more accurately the ideal inventory amount for products, create automated updates in inventory policies, and quickly evaluate inventory segmentation in real-time. The process also allows for posing theoretical impacts on inventory, such as huge customer demand or limited product supply due to an unanticipated event like the pandemic.

The practice of inventory optimization has become particularly more important in an economy now even more reliant on e-commerce. While online shopping already was experiencing an impressive growth trend, the global pandemic added fuel to that fire as even more consumers turned to the internet to shop for basic household items and many of their favorite things. Consumers have come to expect curbside pickup, same-day, and two-day delivery, easy-to-navigate websites, simple returns, and cybersecurity, all accomplished through new and improved digital systems that have become more common.

That’s where inventory optimization comes into play, helping companies navigate the best means of maintaining supply to meet the always evolving customer demand. Just think of the customer demand created by Amazon Prime Day, an initiative created by the company to promote its delivery and customer brand by setting aside specials for consumers that other retailers and companies can take advantage of during the promotion period, typically held each July.

To make the concept work and to reduce any chance of disappointing consumers who have grown accustomed to having their shopping wishes granted online with quick delivery through Amazon, the logistics giant strategically distributes products across its vast network before its Prime Day arrives. The distribution of those products is the result of inventory optimization algorithms and other methods that help anticipate customer demand to ensure as much as possible that if it is ordered, it is available.

It is a powerful process that is revolutionizing the way inventory is handled by companies and the way companies serve customers. While the concept is relatively simple in its emphasis on increased efficiency of meeting customer demand without straining internal inventory resources, it is pretty sophisticated in its application. By using tools such as shipping data, real-time inventory supply tracking, and reorder alerts for customers that can help optimize inventory, companies can save a lot of time and money while protecting their brand as a reliable customer-service operation.

Technology continues to play a powerful role in managing businesses. With greater use of data, information about products, and tracking customer trends, businesses can lean on concepts like inventory optimization to help expand their operations and customer service to more efficiently tackle the classic supply and demand dilemma.

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