Excess inventory has always been a focal point of efficient shipping and receiving. Good logistics mean keeping items on the shelf or in the warehouse for a minimum amount of time so that we can avoid excess inventory. There are many ways to address this that we continue to emphasize with our clients at DMW&H, but there are also some more recent trends that we should pay attention to when it comes to excess inventory.
POST-COVID
Whether you worked in retail, behind the scenes in logistics, or in ecommerce, we all know the impact that the pandemic had on inventory. Lead times stretched for miles, supply chains were disrupted, and labor was completely unpredictable. All of these different factors wreaked havoc on global inventories. Now that we have rebounded from COVID, there are some new and different challenges. Recent reporting by The Wall Street Journal indicates that the global market may need “an additional 800 million square feet of warehouse space to be needed beyond earlier projections to handle the excess inventories, about 300 million square feet of which has already been leased by tenants.” This begs the question: why?
FACTORS
There are a couple of different factors that we can look at for this recent increase in inventory. One is inflation. Inflation indicators have spiked in the last six months as we’ve watched markets tumble and the Ukraine conflict disrupt global commerce. Recent reporting from the UK indicates that inflation may reach as high as 17 or 18 percent. Simply put, people aren’t buying as many things when they are getting hit that hard in the pocket book. This means certain goods are sitting on the shelf longer than predicted. The Journal reports that retailers have also adopted strategies that have increased inventories, like stocking up in case of future unanticipated supply chain disruptions. There are also more consistent trends that are playing a role, such as companies trying to fill their inventories early in time for the holiday buying season. All of this together means that there is a greater demand for inventory space.
STRATEGY
How can we prepare for these changes in the warehouse? Software solutions like those offered by our team at DMW&H are a break way to ride out these disruptive waves. Inventory tracking software can help identify short and long-term trends in demand, helping you only keep the items that you need on the shelves. Demand forecasting that uses the most current software is one of the easiest ways to ride out these changes. There is also room to take advantage of this new demand for inventory. For items that are sitting on your shelves longer, consider offering sales promotions to get those products moving faster. Increasing efficient use of your inventory space may be worth the reduced revenue. You can also consider pairing those items with fast-movers, so that your most popular products help pick up some of the slack.
