Deployment planning: resilience, ESG, & omnichannel trends

The impact of omnichannel shopping, resilience and ESG on inventory deployment planning

ESG visibility and resilience are both part of the core organisational strategy for many global corporations today. And that’s in addition to supporting consumer demand shifts and developing their omnichannel shopping and fulfilment requirements. All while maintaining (or even improving) their profitability.

And at the heart of it is the supply chain, and more importantly, inventory. Inventory is at the core of any supply chain; it is required to meet customer demand. Inventory deployment is the logistical planning and distribution of physical stock around a network. But now, it’s much more than that.

There are three major developments in recent years that have had a major impact on inventory deployment planning: the rise of omnichannel shopping and delivery options, ongoing supply chain disruptions and ESG requirements.

The rise of omni-channel shopping and new delivery options has a significant impact on inventory deployment decisions.

With the rise of omni-channel shopping, it has become essential to allocate inventory strategically across different channels based on demand patterns and customer preferences. Omni-channel shopping often involves fulfilling orders from multiple sources, such as distribution centres, brick-and-mortar stores, or third-party logistics providers.

Supply chain leaders need to optimise their distribution network to ensure efficient fulfilment, such as redesigning the network to facilitate faster and cost-effective deliveries to customers from the most appropriate locations.

Decision makers need to also consider factors such as product popularity, regional demand variations, and delivery capabilities and dynamically allocating inventory to meet online orders, in-store pickups, and direct-to-customer deliveries.

Overall, the shift towards omni-channel shopping and new delivery options requires supply chain leaders to be agile, data-driven, and customer-centric. By adapting inventory deployment strategies to accommodate these changes, they can optimise inventory levels, improve order fulfilment, and enhance the overall customer experience.

The impact of resilience and safety stock levels on deployment decisions.

In a perfect world where demand matches the forecast, suppliers ship on-time and every stage of the supply chain performs to standard, the replenishment of stock is a very straightforward process.

However, in the ever-changing environment of a global supply chain with varying lead-times where every event presents an opportunity for error, replenishment decisions need to be as flexible and agile as possible in order to react appropriately when any element does not conform to plan. Immature organisations manage supply chain inefficiencies by buffering inventory.

Ongoing business disruptions over the past several years has forced many organisations to maintain increased safety stock levels, but this is an expensive strategy. According to McKinsey , retailers are sitting on $740 billion in unsold goods.

Inventory ties up capital and is expensive to transport and store, so companies have look to deployment optimisation strategies to maintain minimal inventory levels, while maintaining customer satisfaction.

With the emergence of new delivery options, supply chain leaders may need to re-evaluate safety stock levels. Different delivery options may have varying lead times, and unexpected spikes in demand or delays in delivery can impact customer satisfaction. Adjusting safety stock levels based on the speed and reliability of each delivery option can help mitigate risks and ensure timely order fulfilment.

ESG considerations now play a major role in deployment decisions.

Measuring and reporting on ESG goals in your company is one thing. Measuring and reporting on ESG goals across the supply chain is an entirely different thing. Supply chain leaders should consider a few factors when it comes to inventory deployment and ESG requirements.

Here are some key considerations:

1. Sustainability: Prioritise sustainable inventory deployment by incorporating eco-friendly practices, such as assessing the environmental impact of products, packaging, and transportation. Consider utilising renewable materials, reducing waste, and optimising transportation routes to minimise carbon emissions.
2. Transparency and traceability: Enhance transparency within the supply chain by implementing systems and technologies that enable end-to-end traceability of products. This helps in identifying potential ESG risks, such as environmental or social issues, and enables effective monitoring and reporting of progress.
3. Reverse logistics and circular economy: Look to develop efficient processes for managing returns, refurbishment, and recycling of products. Implement a robust reverse logistics system that minimises waste and maximises the recovery of materials or products for reuse or resale. Embrace circular economy principles by finding opportunities for remanufacturing, repurposing, or recycling products to reduce environmental impact.

Additionally, leaders should utilise sustainability metrics, such as carbon footprint or water usage, to evaluate the environmental impact of different inventory deployment strategies. Combine this data with customer demand patterns and operational efficiency metrics to find the optimal balance between omni-channel requirements and ESG goals.

Three ways supply chain leaders need to balance omnichannel shopping and ESG.

It appears to be almost impossible strike a balance between these two seemingly conflicting priorities: that is trying to keep stock everywhere to support rapid fulfilment at any point as well as minimise the impact on the environment:

Here are a few strategies to consider:

1. Sustainable transportation and logistics: Optimise transportation routes and modes to minimise carbon emissions and environmental impact. Consider using eco-friendly vehicles, promoting shared transportation options, and consolidating shipments to reduce the carbon footprint of deliveries across multiple channels. Balancing speed and efficiency with environmental sustainability is key.
2. Efficient inventory management: Implement inventory optimisation techniques to minimise excess inventory and reduce waste. By accurately forecasting demand across different channels and adopting lean inventory management principles, supply chain leaders can reduce the need for excessive storage and mitigate environmental impact.
3. Novel fulfilment options: while this would support omnichannel shopping requirements, there are innovative options that also support ESG initiatives such as pop-up nodes, shipping directly from the factory or even mini warehouses located in cities or densely populated areas. Manufacturers could even consider 3-D printing techniques.

By adopting these strategies, supply chain leaders can strike a balance between omni-channel shopping requirements and ESG considerations. This allows for responsible inventory deployment that meets customer demands while minimising environmental impact and promoting sustainable practices throughout the supply chain.

Leverage systems to optimise deployment decisions.

Decision makers need to leverage data analytics and technology to make informed inventory deployment decisions.

With omni-channel shopping, customers have multiple options for purchasing products, including in-store, online, and through mobile applications. This requires supply chain leaders to have real-time visibility into inventory levels across various channels. Accurate inventory data becomes crucial to ensure availability and prevent stockouts or overstocking.

Managing the overall inventory mix for large global networks requires a dedicated purpose-designed planning system of which deployment should be at the heart. With millions of SKU’s experiencing daily supply and demand fluctuations coupled with the day-to-day challenges facing supply chains, it is essential that the planning system is able to react in an agile and flexible way. Tied into the customer satisfaction measure, a system that forecasts line demand allows the deployment function to best allocate available inventory and maximise the return on investment.

It’s also essential to refine order management rule to reflect latest inventory holding costs, node capacity and transportation economics. As well as incorporate sales trends to create an early warning system for imminent inventory imbalances.

To support ESG KPIs, leaders will need to continuously monitor metrics such as carbon emissions, waste reduction, supplier compliance, and customer satisfaction. Regularly assess and report on ESG performance to demonstrate transparency and accountability.

Conclusion

Balancing organisational resilience with omni-channel shopping requirements and ESG considerations in inventory deployment decisions can be challenging, but it is crucial for sustainable and responsible supply chain management.

Efficiently managing large inventories requires systematic deployment functionality that can drive huge supply chain cost savings whilst also supporting ESG requirements and increasingly demanding customer requirements.

Traditionally, it been seen a complex plan focused on strategically minimising the inventory and storage levels and typically involves many geographic locations and stakeholders. The next generation of inventory deployment will require new digital technologies and advanced analytics allowing precise planning to drive efficiency and effectiveness.

To find out more read out “The five components of benchmarking inventory turnover” blog here.