Building Resilient Operations in an Unpredictable Market

Want resilient operations that can withstand anything the market throws at them?

Things are crazy right now. Markets are wildly unpredictable. Supply chains are being disrupted from every angle.

If you’re not building resilience into your operations, you’re falling behind.

Fortunately, manufacturing inventory optimization can help.

When you approach inventory optimization with the right strategy, you can build manufacturing operations that stand up to disruptions no matter what they are.

Here’s what we’ll cover:

1. Why You Need Inventory Optimized Operations Now
2. Fundamentals of Manufacturing Inventory Optimization
3. Top Inventory Optimization Strategies to Implement
4. Your Step-By-Step Optimization Roadmap

Why You Need Inventory Optimized Operations Now

Let’s look at the facts.

According to Resilinc’s analysis, supply chain disruptions climbed 38% year-over-year in 2024. Increases like that are troublesome for any organization, but manufacturing suffered more than any industry with a 39% increase in disruptions.

Problem is…

Many manufacturers are managing inventory like it’s still 2019. Guesswork-based decision-making is still common. Cheap/free inventory management spreadsheets are still widely used. And those manufacturers are paying the price.

Inventory optimization and proper inventory management for manufacturers is critical. When disruptions occur, optimized inventory helps your business stay operational when others are shutting down. Optimized inventory gives you the financial flexibility you need to pivot when plans fall through.

Remember, every dollar sitting in excess inventory is a dollar that could be invested elsewhere growing your business. Every stockout costs you sales and leaves customers disappointed. Inventory optimization helps you find the balance between the two.

Fundamentals of Manufacturing Inventory Optimization

Before we dive into specific tactics, let’s review the fundamentals of manufacturing inventory optimization. Without these fundamentals, your optimization efforts will fall flat.

We see manufacturers every day investing in fancy new technologies and blindly copying the tactics their competition is using. That will get you nowhere.

Successful manufacturing inventory optimization requires a strong understanding of the fundamentals. Namely:

Visibility

Inventory optimization requires visibility. You can’t make informed decisions if you don’t know your inventory levels, where your stock is located, or how quickly you’re moving inventory.

Demand forecasting

Past sales data should drive your inventory decisions. But it’s not the only factor. Incorporate market trends, seasonality, and known disruptions into your demand forecasts.

Flexibility

Things aren’t going to go exactly according to plan. Especially in today’s environment. Building flexibility into your inventory strategy allows you to react to the unexpected.

And don’t forget…

There’s no such thing as a perfectly optimized inventory. Outages and excess inventory are inevitable. But with manufacturing inventory optimization, you can minimize risks to your bottom line and keep customers satisfied.

Top Inventory Optimization Strategies to Implement

Ready for some tactics? Here are the top strategies that lead to inventory optimization.

Categorize Your Inventory

It should come as no surprise that not all inventory is created equal.

We’ve all seen it at one manufacturer or another. The same inventory controls are being used to manage high-margin, fast-moving items as are being used for low-margin, slow-moving items. It makes no sense.

Manufacturers should be categorizing their inventory by value and velocity. Once you know how much value each item is bringing to your business and how quickly it turns over, you can adjust your processes to best fit that category.

High-value, fast-moving items should be managed more closely with tighter controls and higher visibility. Low-value, slow-moving items can be managed with less sophisticated systems.

Calculate Safety Stock Levels

Safety stock exists for a reason. It protects you from interruptions in inventory. But that doesn’t mean you should operate using large amounts of safety stock.

Try to calculate appropriate safety stock levels based on:

• Supplier lead time variability
• Demand fluctuation
• Customer service level goals

Not sure where to start? A McKinsey survey found that 45% of companies who have experienced supply disruptions in the past say they are increasing inventories to mitigate future supply disruptions.

Safety stock is great… to a certain extent. Figure out how much stock you really need and try not to go over that amount.

Develop Supplier Relationships

Weathering supply chain disruptions comes down to your suppliers.

Relying on a single supplier for your inventory is risky. If they go down, so do you. Multi-source wherever possible to give yourself options if a supplier can no longer meet your needs.

Developing relationships with your suppliers is equally as important. Communicate with them. Let them know what you’ll need and when you’ll need it. Understand their limitations and work with them to find solutions. You’re in this together.

Implement the Right Technology

Technology can be a game changer when it comes to inventory optimization. Taking advantage of modern inventory management technology can give you real-time visibility into your stock levels and locations. It can automate your reorder processes. And it can provide advanced analytics to inform your future decisions.

Just don’t try to do too much at once.

If you currently aren’t using inventory software, start there. Get your data clean and organized. Then layer on automation, advanced analytics, and forecasting as you grow.

Continuously Monitor KPIs

The optimization journey doesn’t end.

Change is the only constant in manufacturing and inventory management. Customer demand will shift. Supplier reliability will fluctuate. New disruptions and challenges will arise.

Your inventory strategy should be regularly evaluated to ensure it’s still effective. Identify key performance indicators like inventory turns, stockout rates, and carrying costs. Then monitor those metrics on a monthly (at minimum) basis. Adjust as needed.

Your Step-By-Step Optimization Roadmap

Okay! Now it’s time to put it all together. Here’s your step-by-step guide to building inventory optimization into your manufacturing business.

Step 1: Know what you have. Conduct an inventory audit and determine exactly what’s going on within your current inventory.

Step 2: Begin segmenting inventory by value and velocity.

Step 3: Calculate safety stock levels for each segment.

Step 4: Review supplier relationships and identify opportunities to multi-source.

Step 5: Implement technology to provide visibility and automate manual processes.

Step 6: Identify KPI’s to monitor and regularly evaluate your inventory strategy.

And that’s it! Inventory optimization is simple when you break it down but does require some effort.

Wrap-Up

Inventory optimization is critical to building resilient operations that can withstand the challenges of today’s markets.

Supply chain disruptions are here to stay. If anything, they will continue to grow in frequency and severity as we move into the future. Once-in-a-decade factory fires? They happen multiple times a year now. Labor shortages? Collapse of global suppliers? Extreme weather? You name it. Every manufacturer will have to deal with these issues.

With a solid inventory optimization strategy in place, you can prepare your business for whatever comes your way. While your competitors are reacting to disruptions, you’ll be ready to pivot at a moment’s notice.

Focus on the fundamentals. Build upon that foundation. And continue to optimize as you grow.

Your business will thank you.