Supply Chains and COVID-19: Why Materials Inventory Management Matters and Actions You Can Take Now

Since the coronavirus, or COVID-19, hit the shores of the United States, the negative impact that it has had on us all―both personally and professionally―is unprecedented. Months before that, though, the unexpected outbreak that started in China and quickly spread to other APAC regions had already begun sending seismic ripple effects up and down global supply chains.

Manufacturers are struggling to secure the necessary components, parts and/or materials to assemble their products because many of the factories in China have shut down or severely reduced production capacity. A new economic survey indicated that nearly 75 percent of U.S. companies have experienced supply chain disruptions due to the COVID-19 pandemic.  

All Industries Impacted, but Some Are More at Risk

It’s hard to envision one industry that doesn’t depend on materials, parts or labor from China (and other countries that offer similar low-cost incentives). Obviously those manufacturers that depend solely on these regions are most likely experiencing the full “bullwhip effect” throughout their supply chains. Industries such as automotive, aerospace, electronics, consumer products and pharmaceuticals are good examples of those that have developed long-term partnerships in these regions to support their global supply chains. The complex nature of many of these supply chains makes an immediate sourcing pivot akin to turning a battleship. Until this pandemic officially ends, we expect to see other industries become more at-risk for major supply chain disruptions.

While changing consumer demands have placed increasingly more pressures on our supply chains, our just-in-time economy has never faced a challenge such as this. We should be worried about companies of every size throughout the entire supply chain ecosystem―from big-behemoth suppliers to the small- to medium-sized firms that have niche roles in delivering very specific parts to manufacturers (and who may very well get supplies from China as well).   

Take Action Now to Control What You Can

When this inventory management crisis ends―and it will end―it’s important to know that it more than likely will be a long and lengthy recovery until normal operations are once again realized. Getting as far in front of the situation as possible now will help avoid the backlogs that are expected to continue to occur for some time. Fulfillment lead times for a majority of U.S. businesses have already doubled―further complicated by the lack of logistical freight options to transfer materials/products to the United States.

Even though we’ve entered uncharted waters without well-defined solutions to fight back all of the negative effects of the coronavirus, manufacturers can proactively take action now to control what they can and preserve what inventory buffers they may still have in place.

We’ve previously written about very doable steps that allow manufacturers to regain pinpoint control of their supply practices, material availability and real-time data analysis. Never has it been more important to accurately know your materials inventory, insure your stock levels, and conserve cash for market-disruption flexibility. Many of these steps we feel are worth repeating in addition to some new actions to take: 

Conduct a Strategic Inventory Review

Take immediate steps to learn how personnel across all departments, divisions and locations are making inventory replenishment decisions. Require the daily tracking of the movement of inventory for all materials in stock.

Know Exactly What You Have (and Where to Find It)

One plant’s scrap is another plant’s treasure. Overstocked products and obsolete materials housed at one plant might easily satisfy next month’s production requirements at another company facility. Subscribe to a “buy from yourself first” approach. 

Clean Up Your Data  

Poor data often leads to inaccurate inventory counts. Commit to data cleansing and maintaining fresh and accurate data in order to provide clear availability and access for production and maintenance requirements 

Go Nimble

Adjust agile supply chain processes to stay nimble and flexible for the changing landscape. Encourage your team to replan on a daily or weekly basis and use shorter planning horizons. 

Tighten Cashflow

Protect your cash position with tighter cash-flow controls. Identify areas where you can safely reduce costs and mitigate unwarranted cash outlay, for example in the purchase of unnecessary and excess inventory.   

Crises Lead to Opportunities to Innovate

It’s an evolving manufacturing environment, and it will only become more challenging in the coming months to secure and maintain just the right amount of inventory to meet production needs. COVID-19 has undoubtedly created confusion and havoc within our current manufacturing operations, especially in inventory management and procurement.

On behalf of the entire Verusen team, we want to recognize the extraordinary work supply chain professionals are doing around the clock to help restore not only the U.S. economy, but that of the entire world.

We understand the very fluid nature of the situation, and want you to know that Verusen’s AI and machine learning platform is purpose-built to help to quickly understand your data challenges and learn from the important decisions you are making today. Just as other major events have challenged our nation, our economy, and our supply chains, we’ve weathered the storms and taken the lessons-learned to adapt, evolve and innovate, not just for uncertain events, but also for having every-day agility in your future. Overcoming these challenges will only make our global economies and supply chain ecosystems that much stronger.