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Best Practices for Long Lead Time Inventory Management

Jul 16, 2021 3 min

The supply chain can be complex for retailers with local suppliers, but factoring in overseas transports, global holidays, and slow-moving products can create an even more complicated and challenging network. Products with long lead times present a pain point for retailers with international suppliers and can complicate their ability to keep inventory optimized. Although the associated risks and frustrations are ever-present, there are a few best practices that can, at the very least, help reduce some of the complications of managing inventory with long lead times.

1. Use a Replenishment Solution to Optimize DC Capacity and Workload

Because planning and visibility are paramount to running a smooth supply chain, complex obstacles such as DC capacity and workforce availability can impact the ability to fill your shelves with the right product at the right time. One key practice is to look at a solution that can optimize replenishment.

This type of solution can plan for inventory capacity, so you only purchase the holding space you need and have the correct number of hands at your DCs to process your incoming shipments. By evaluating capacity needs, you can eliminate inventory holding costs while adequately forecasting your workload, saving on labor expenses.

Effective capacity management can also support proper space for slow movers and excess long lead time inventory that is not ready to go on the shelf. This type of planning is especially important during challenging shipping seasons such as the lunar new year, when inventory space may be less available and holding costs more expensive.

2. Prepare for International Holiday Disruptions in Long Lead Time Supply Chains

On the subject of the lunar new year, be aware of international events that can affect the efficiency of your supply chain. Chinese New Year is a significant holiday that causes major factory shutdowns in China around January and February. Other countries with similar lunar new year holidays may also influence your long lead time inventory from those regions. After holiday events have ended, it still may take suppliers a few weeks to resume full operations. During this time, your long lead time products will be either unavailable or in limited supply.

Prepare extra space capacity to hold products during such shutdowns and smooth your delivery flow to increase your inventory holding slowly over time. Planning for shutdowns like this can begin as early as June because some suppliers start limiting purchasing orders as early as October.

3. Monitor Network Inventory and Strengthen Relationships with Alternative Suppliers

Another important practice for retailers with long lead time products is evaluating the available inventory across your entire network. Knowing where you have extra inventory can help in a pinch if there is a supply chain disruption. A technology solution that can accommodate a retailer’s shift in inventory data is, of course, a bonus.

An alternative supplier for both domestic and international products can also be a lifesaver in an emergency or when specific areas of the globe are affected by factory closures, shifts in global tariffs, or new regulations. Suppose a particular area of the world is being affected by an external issue such as weather emergencies or holidays. In this case it can help to have an alternative until your usual suppliers can resume operations as normal.

Above all, keep your supply chain simple and effective. By putting some of these best practices to use, you can be sure to alleviate the frustrations that come with long lead time inventory management:

  • Find a technology partner with a good solution that can take some of the guesswork out of optimizing your supply chain.
  • Be aware of where your products are coming from and how shipping may be affected.
  • Examine your inventory network and identify backup suppliers in case of emergency.

Written by

Molly Prucha

Business Consultant