Apr 08, 2021
Packaging companies: Optimize your inventory to help meet new demands
It's an exciting time to own a packaging company in the world we live in today. Shifts in consumer demands, a move towards more eco-friendly materials, and innovative technology are all knocking at your front door. While your business may not be ready to embrace all these changes, how you manage your packaging inventory is key to unlocking your profits, freeing up your time so you can focus on the next evolution of your business. So, where to from here?
During the last few months, we have become more aware of consumer purchasing trends, which has piqued our interest in the packaging industry. Packaging companies have performed a vital and necessary role during the COVID-19 pandemic and still hold an integral place in the global supply chain.
To demonstrate the industry’s immense value and contribution during the pandemic, the only real “touchpoint'' a consumer experienced with a brand was through its packaging.
According to Business Wire, a press release distribution company, the global packaging industry is expected to grow by 7.5% from 2019 to reach USD 1,652.28 billion by 2027.
While many experts suggest the industry will experience growth, packaging companies need to think strategically and have the right tools to adapt quickly to navigate the significant shifts and megatrends that will eventually affect their business.
Growth in the packaging industry brings new opportunities.
We know consumer trends are shifting and, with an increase in hygiene protocols, companies are looking to develop new sustainable packaging solutions, specifically in the FMCG and Pharmaceutical industries.
Disruptions add complexities and a demand for new products.
The increasing demand for environmentally friendly packaging materials is staggering. According to experts at Grand View Research, a market research company, the green packaging market globally is expected to grow at an annual rate of 6.0% from 2020 to 2027 to reach USD 413.8 billion by 2027.
Other trends and factors to consider:
- Introduction of touchless packaging
- Flexible packaging
- Development of Ecommerce packaging
- Increase in manufacturing costs
- Shortfalls in global supply chains
We know change is approaching “your doorstep,” but let's take a look at your inventory and explore what adjustments you can make today to help optimize your business for future gains.
Have complete visibility and control over your inventory.
During the COVID-19 pandemic, many companies faced severe disruptions to their daily operations, with some companies experiencing devastating outcomes.
With global disruptions to supply chains, you may have experienced an increase, decrease, or even no demand, resulting in excess inventory or potentially experiencing stock-outs. As global trade slowly starts to ease forward, balancing your inventory now is critical, and once you achieve inventory efficiency, this can increase your sales.
A visible dashboard to reach your KPIs.
You need to be able to manage and measure your inventory. The main areas in your stock holding where potential capital is tied up are excess stock and surplus inventory orders.
With a visible dashboard, you have a clear line of sight of these values, you are able to track your fill rate, and know when you may experience stock-outs. All this information gives your operations team or your inventory planner an indication of what’s in your warehouse, where the problem areas lie, and where they need to focus their attention.
Classify your inventory to know the exact amount of stock items you need in your warehouse. The best way to achieve this is to classify your inventory; label items stocked, non-stocked or obsolete (which won’t be re-ordered). Once you have categorized your stocked items according to the NETSTOCK classification matrix, you can now focus on your fast-moving, profit-generating items and reduce stock-outs.
Place optimal orders quickly.
Placing the right orders is a critical part of managing your inventory, and with every order placed, you will have more capital tied up in your inventory.
This is mostly science: you need to consider a few situations taking place in your inventory ecosystem and factoring in your supply and demand. Using the latest accurate stock on-hand figures and then factoring in existing open purchase orders, supplier lead time, minimum order quantities, and target fill rate.
The key to optimal orders is having the appropriate level of safety stock calculated based on the risks for that stock item in a location. If your supplier consistently delivers stock items late, then you need more safety stock. If your supplier consistently delivers items early, then you need less safety stock.
Forecasting also affects the amount of safety stock you need. If you consistently sell less of a stock item than what you forecast, you are more likely to generate excess inventory. If you consistently sell more of a stock item than you forecast, you increase your risk of running out of stock; therefore, more safety stock will be required.
Adding a touch of art: connecting with your team for any market intelligence can help further define your optimal purchase orders.
Review and adapt your supply chain to meet demands.
Communicate with your key players in your supply chain. This may be a rather simplistic observation, but you need to be aware of the challenges taking place in your supplier’s ecosystem and how this may influence your inventory replenishment.
- Consider developing relationships with alternative suppliers when you quickly need an alternative solution.
- Develop a regional footprint. Growing your supplier base will help you mitigate your risks and continue to deliver excellent service to your customers.
- Review your data to measure your supplier's performance and lead times, especially for your fast-moving and high-value stock items, as it’s critical to ensure you have the right stock at the right time for your customers.
Be able to adapt quickly with the help of technology.
Be open-minded and informed about the advances in technology that support the packaging industry. For your business to efficiently respond to change, you need the right technology that will allow you to act responsibly.
You should avoid having to update spreadsheets. Your team can save time and avoid manual processes that are often prone to human error.
Your inventory drives your profits. Investing in inventory management software that leverages your existing ERP data will provide accurate data for you to make the right decisions quickly.
Imagine being able to:
- Classify your inventory to ensure you place the right orders at the right time.
- Collect and collate inventory data to generate ideal order recommendations to avoid having excess inventory or experiencing stock-outs.
- Create detailed forecasts that factor in seasonality, trends, and once-off sales spikes for your sales team to plan optionally for the future.
- Review your key supplier’s lead times to make sure you meet your customers’ demands.
Plan now to future-proof your business.
Right now, you may not be ready to diversify your product range. Invest in inventory management software today, and start building a resilient foundation from where you can keep growing your business. Once this foundation is in place, you will have more time and resources to expand your product range and grow your customer base.
Are you serious about increasing your profits? Do you know what areas of your inventory planning you need to focus more attention on?
Written by The Inventory Mentor
The Inventory Mentor provides thought leadership insights and industry trends for the supply chain industry.