In recent years, global supply chains have encountered extraordinary pressures, highlighting critical vulnerabilities across industries. The COVID-19 pandemic, in particular, triggered widespread disruptions that impacted 94% of Fortune 1000 companies, with 75% reporting significant negative effects.
From increased operational costs to reputational hits due to unfulfilled orders, the pandemic shifted how businesses think about inventory management. Industries reliant on physical goods were hit particularly hard – healthcare providers struggled to procure PPE, and consumer electronics faced a global shortage of computer chips.
Today, even as the worst of the pandemic fades, supply chains are still challenged by geopolitical uncertainties and inflation. To build resilience, companies need strategies that will help them adapt to future disruptions while meeting customer demand effectively.
Here’s how the pandemic has reshaped inventory planning, along with actionable strategies to stay competitive in an unpredictable landscape.
Pre-pandemic inventory planning: efficiency at a cost
Before COVID-19, many companies adhered to a ‘just-in-time’ (JIT) inventory model, balancing supply and demand as efficiently as possible to keep costs low.
Benefits of JIT inventory:
- Cost-effective
Less need for warehousing and large stock quantities. - Minimises waste
Less chance of overstock and expired products. - Efficient
Allows for quick turnaround, with inventory ordered to meet immediate demand.
However, the downsides of JIT quickly became apparent during the pandemic.
Drawbacks of JIT inventory:
- High dependency on suppliers
Businesses relying on specific regions or suppliers found themselves stalled when disruptions occurred. - Difficult to scale quickly
Surges in demand left some without enough inventory to fulfill orders.
From just-in-time to just-in-case
The pandemic forced many companies to rethink JIT and adopt a ‘just-in-case’ (JIC) approach, where businesses hold buffer stock to cushion against unpredictable demand spikes.
In addition to holding higher safety stock levels, companies are also preventing stockouts and mitigating supply chain risks by diversifying suppliers and sourcing materials from regions closer to home.
Benefits of JIC inventory:
- Risk mitigation
A safety buffer ensures operations continue even during disruptions. - Reduced supplier dependence
Less reliance on individual supplier agility for additional critical stock - Greater customer satisfaction
Helps businesses quickly adapt to demand surges without risking customer dissatisfaction.
However, JIC comes with its own set of challenges:
Drawbacks of JIC inventory:
- Higher holding costs:
More warehouse space and inventory volumes increase costs. - Risk of overstock:
Dead stock becomes a concern if demand doesn’t meet projections.
Five key strategies for resilient inventory management
For companies looking to future-proof their supply chains, here are five key strategies for managing inventory effectively in a volatile world:
- Differentiate base vs. event-driven demand
Separate inventory needs for predictable demand (like staple products) from unexpected spikes (e.g., holiday sales or natural disasters). This approach helps ensure that surges don’t exhaust baseline inventory. - Segment products for strategic inventory management
While the Pareto Principle – where 20% of stock typically accounts for 80% of revenue – is a useful starting point, applying a more granular product segmentation strategy allows businesses to prioritise inventory not just based on revenue, but also on demand variability. This ensures that critical products are replenished more frequently while minimising the risk of overstocking less impactful goods. - Plan for variability
Lead times and market dynamics remain unpredictable, making it essential to integrate scenario planning with inventory management. This approach allows businesses to respond swiftly to disruptions as they arise. For instance, when Hurricane Helene halted production at a key supplier’s factory, effective scenario planning would have enabled the business to quickly assess the situation and adjust inventory allocations to other locations, thereby minimising impact on customers and ensuring continuity of supply. - Collaborate across departments
Effective inventory planning requires alignment with sales, marketing, and operations. Sales teams may receive early indications of demand shifts, while marketing plans can predict product demand based on upcoming promotions. This internal collaboration enables proactive inventory adjustments. - Leverage the right technology
Staying competitive requires up-to-date visibility across the entire supply chain. Manual systems like Excel carry a high risk of error. Pigment’s inventory planning solution centralises data, integrates with various programmes, and leverages AI and machine learning for quick, accurate forecasts. With Pigment, teams can focus on strategic planning rather than data entry.
How Ankorstore Optimised Supply Chain Planning with Pigment
Ankorstore, a leading European wholesale marketplace, faced significant challenges in managing its extensive product catalogue of over 30,000 brands. They relied on manual processes for inventory management, which were time-consuming and lacked scalability.
By applying Pigment's robust architecture and integration capabilities, Ankorstore achieved a 20% to 25% improvement in forecast accuracy and reduced the time spent on creating fulfilment recommendations by 33%.
Embracing a new standard for inventory planning
As supply chain pressures and economic uncertainty persist, businesses cannot risk relying solely on old approaches. For businesses ready to set a new standard in inventory planning, Pigment offers the tools and insights needed to transform challenges into opportunities.
