Inventory builds up throughout the supply chain due to uncertainty in supply. This leads to large fluctuations in inventory levels and increased costs of aging inventory. Communication gaps between suppliers and retailers result in order backlogs, delays in material and data flow, and shortages. Inaccurate demand forecasting and policies like free returns can further exacerbate inefficiencies. Several strategies are proposed to address these issues, including smaller order sizes, reduced lead times, using point-of-sale data to improve forecasting, vendor managed inventory programs, and limiting free return policies.

1. - Rishi Varma

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Build up of inventory in the supply chain
Build up is up-stream
Germinates from uncertainty of supply
Large fluctuation in inventories across the
system
CoQ impact of ageing inventory

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Order backlog
Supplier doesn’t take new order, tries to
reduce old (sometimes irrelevant) inventory
Communication and coordination gap
Delay in material & data flow
Large batch sizes
Varying prices
Shortage gaming
Demand forecast inaccuracies
Free return policy

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Full truck load economics
Outsource to 3PL
Assorted truckloads
Small order / batch sizes
Reduce lead time & DDP
EDLP - every day lowest prices
PoS data to counter demand forecast
inefficiencies
VMI
Replenishment (Trigger point, MoQ)
Prohibit / limit free return policy