The Link between Inventory Control, Supply Chains and Improved Customer Service – It Cannot be Ignored

Inventory Management
9 min read
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Not all businesses experience equal success. There are some businesses that are able to really judge the pulse of the market and deliver, while there are others that are well aware of what works and what doesn’t, but are still unable to do well.

There are many reasons for the inability of businesses to generate high ROI and achieve a fair degree of profitability. But, if you compare two businesses in the same niche offering similar products, what separates the successful business from the unsuccessful business is poor customer service.

Yes, the unsuccessful business cannot satisfy the needs of its customers in the way customers want these needs to be satisfied.

Bad customer service is suicidal for a business, any business. Your business can lose a lot of money if it doesn’t meet the highest industry benchmarks of customer service. The money that businesses are losing because of poor customer service is a mammoth $75 billion every year!

The reasons for poor customer service can be many, right from a poor understanding of what customer service means to an inability to understand the intrinsic needs of customers and from an untrained workforce to lack of technological investment in customer service.

At times, businesses tend to ignore the most evident business process/activity that plays a huge role in improving customer service; what’s more not ensuring its seamlessness can lead to the business incurring tremendous losses.

One such business process is inventory control, which is intrinsically linked to optimal supply chain management, which in turn ensures a business can meet demanding customer expectations. Inventory control ensures businesses are able to meet product demand and ensure product supply, on time, every single time.

Inventory Management is the Foundation of a Good Supply Chain

One of the key characteristics of a world-class supply chain is optimum inventory control. As a business, you will be facing stiff competition and you must be able to maintain a competitive edge. You can achieve this through great customer service and by meeting the highest levels of customer satisfaction, but that is the end goal.

The road towards customer satisfaction begins with inventory control that enhances supply chain management.

Inventory control offers greater transparency into your supply chain operations and helps you exercise more control over these operations. A supply chain is made up of numerous processes with one common objective – seamlessly and speedily delivering an ordered product to the customer.

As a business you must manage your inventory in a way such that ‘there is always a product to supply’. Inventory management involves following the entire product lifecycle right from product development, product manufacturing, and product transportation to warehouse and finally culminating in product delivery to the customer or store.

As a business owner, especially a retail business owner, inventory management is a critical component of everyday operations. With products being bought continuously, your business needs to be able to keep track of the available products, the products that need to be replenished, expired products and dead products (products with low or no demand).

You must be in control over the availability of your products and you should be able to maximize the use of your product inventory. The key to error-free supply chain management is maintaining complete inventory balance. But, it’s not just about ensuring that you are completely in control of your inventory including purchasing, shipping, receiving, storing and reordering.

It is much more than that.

Inventory is a vital Cog in a Supply Chain

It’s your inventory that is essentially going to determine your revenue and business profitability. So, you must ensure that you are able to manage it in the best possible manner. Also, any problem with inventory management percolates to the supply chain process, and causes problems through the entire chain.

Inventory control, wherein you are employing granular inventory tracking tactics ensure you are able to pinpoint problems with your supply chain. You can identify non-performing vendors/partners, unnecessary steps eating valuable time and impacting your bottom-line, and areas of improvement.

Here are a few ways how better inventory control, helps improve the supply chain:

  • While inventory control gives you more visibility into your inventory, it also gives you better visibility into your supply chain process and its inefficiencies.

For e.g., if your business is promising a certain level of service from the shipping perspective, and failing to meet its promises, inventory control can give you more clarity on the reasons for the same.

  • There are times when the supply chain process essentially is doing fine, but it experiences problems because of product sourcing problems, stockouts, overstocks,stock obsolescence, and more. Proper inventory control helps identify and sort out these problems.
  • You can also identify other potential problems with your stock that are impacting product demand. For e.g., if a product you think highly of, fails to garner market traction, is it because you were unable to cater to its high demand (which led to customers losing interest in the product) or there are other reasons for it?
  • A huge advantage of inventory control is that you can leverage the potential of ‘Big Data’ to make meaningful customer-centric decisions. You can plan for the future and predict the challenges you might face.

As a business, you can get actionable insights into past sales history, which can help you predict demand for a particular product. Let’s say, a few products saw increased demand during the holiday season, but lack of inventory control meant the product was in short supply and your supply chain was a mess. Result – dissatisfied customers.

Such problems can be sorted out with cutting-edge inventory management.

Optimal Management of Supplier Relationships

‘This is yet another facet of inventory control, improved supply chain management and customer service. Your business will need to manage supplier relationships.  Proper inventory control helps drive a collaborative relationship between your business and its suppliers. This helps manage product flows.

Great customer service stems from your ability to balance the demand and supply of products, which means your suppliers must have the most current information about product demand.

If you know you will run out of a particular product soon, you must be able to let your suppliers know about the situation well in advance. You don’t want them to be placed in a situation wherein they will be scrambling to meet your demand. In such cases, the pressure is felt across your entire supply chain.

At the end of the day, this has a detrimental impact on your downstream customer demands, which means you, might or might not be able to fulfill customer expectations. There is a lack of equilibrium and poor inventor control means strategic information is not shared through the supply chain, leading to problems.

It’s all about Maintaining the Flow – Equilibrium is Paramount

With inventory management, you can not only manage the physical flow in supply chains but also the information flows. A supply chain is essentially made up of movement of goods and materials as well as the movement of information.

Your business must be able to maintain equilibrium between both the physical and information flows. Disruption in this balance can directly impact your business’s customer service.

Let’s understand this with an example:

As a retailer, you are in the process of fulfilling a customer order. This order is shipped from a warehouse, and it’s on its way, but the customer suddenly changes the delivery location. What do you do? Do you tell the customer that it can’t happen?

In this case, the customer might just cancel the order or develop a negative bias for your business and its customer service.  As a retailer, you need to ensure your supply chain process has the ability to be flexible. It is in this particular case that the physical and information flow must be in perfect sync with each other.

As soon as the customer changes the delivery location, the message must percolate downstream and the delivery to the earlier location must be stopped. The product delivery must then be routed to the new location. In this case, you might want to ship the product from another warehouse that is closer to the delivery location.

Customer Service is the Heart of Inventory Control and Supply Chain Strategy

Throughout this article, we have discussed how problems with inventory control impact the supply chain, which then impacts customer service. Let’s drill down on the customer service aspect.

The one truism about customer service that no one will deny is that customer expectations have increased manifold.

The above figure illustrates the fact that a large percentage of customers see customer experience as a critical factor for determining whether they support a business or not. The question is – does your business feel the same way?

Let’s take a look at customer experience from the supply chain perspective:

  • A mammoth 52% of online shoppers want to ship to alternate locations.
  • 30% of online orders are delivered to alternate locations.

As a business, if your supply chain is unable to cater to the delivery requirements of your customers, you are going to have dissatisfied customers on your hands. They will move to another business that satisfies their requirements.

Today’s customers want products to be delivered faster in an absolutely error-free manner and they want to monitor their shipping every step of the way, they want to be able to monitor their order all the time. Most customers are also looking for customized delivery options and also do not like a product being ‘out of stock’.

While satisfying these expectations might sound challenging at first, all of them can be addressed if you maintain optimal inventory levels, and work toward seamless supply chain management.

Here’s an example of coming good on customer service expectations:

A customer wants to order a particular product but it’s of out of stock. The customer expects this product to be available well in time for the holiday season, which is a few weeks away. As a business, you want to make this product available to the customer as soon as possible.

If you have granular visibility into your inventory, you are immediately aware of the product being out of stock and you place an order for replenishing this product almost immediately. This accelerated response to the problem ensures the product is available in record time, and the customer is informed of the same. The customer is now able to place a product order well before the holiday season.

As can be imagined, you have lived up to the customer’s expectations through improved customer experience.

Using the Right Tools Helps

The first and possibly the most important step towards better inventory control, enhanced supply chain management and improved levels of customer service is deploying an inventory management system.

Make sure that the inventory management system you choose is feature rich and addresses each and every aspect of your inventory such as inventory management, order management, order fulfillment, multichannel management, warehouse management, purchase receipts, and much more.

How do you go about choosing the right inventory control software? It’s simple. Identify all your needs, and make sure that the software has all the features that will help address these needs. It’s imperative that your software helps automate the various tasks that have a bearing on your supply chain.

Gone are the days when you could depend on a manual process for ensuring an optimally performing supply chain. The modern supply chain is extremely complex and any process that is performed manually is prone to mistakes. A mistake can result in a dissatisfied customer – you don’t want that to happen, do you?

To Conclude

The link between inventory control, supply chain and customer service shouldn’t be weak. It’s important to remember, there will be plenty of challenges coming your way that will impact this link. But, the link must be strengthened in a way such that you are ready to face any challenge that the market may throw at you.

Customer expectations keep on growing and so does the competition. You will need to keep improving your inventory control and supply chain all the time to ensure they don’t fail to meet growing customer expectations and competition. This will help keep your bottom line in check and at the same time grow your top line.

So give your inventory, supply chain and customer service the importance it deserves.

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