The “just-in-case” and “just-in-time” phases of inventory cycles alternate, but current trends are pressuring manufacturers to build up unduly huge stockpiles. Stockpiling may appear to be a wise precaution, but history has shown that it can backfire, lead to instability, and increase inflation.

Both the just-in-time and just-in-case approaches have a workable replacement. When the supply and demand scales tip, firms should use vendor and supplier relationships to find stability rather than hoarding to protect resources.

Barriers Emerge from Buffers

In the semiconductor business, demand is outpacing supply, which has resulted in higher pricing and longer lead times, which is expensive for individuals who cannot afford to wait for products.

A crucial component of the just-in-case management concept is purchasing buffer stock. Carrying higher stocks is necessary in case supply chains break down. Overordering, however, further reduces the market’s supply, which leads to higher costs and longer lead times.

Carrying expenses are considerable in these circumstances, and buyers may hire third-party warehouses for storage. As a result, buffer stock is no longer a benefit but a liability because it restricts cash flow and complicates logistics.

Stockpilers Will Face Problems After Restored Supply

Companies become aware of the drawbacks of the hoarding strategy when supply chain problems begin to abate. The market’s demand is waning at the moment. Consumer spending has decreased as a result of rising commodity costs brought on by inflation and situations like the Russia-Ukraine conflict. Since consumer electronics purchases often trend downhill first, they are likely to suffer the most. Manufacturers are being harmed by this transition, especially since they had increased demand during the pandemic’s peak.

Reduced company outlooks are a result of the impact. After predictions indicated a 3-8% price drop for DRAM chips, Micron, which manufactures DRAM chips for technologies such as personal computers and smart phones, announced a dramatic reduction in output.

Even though Micron will have to store the chips that have already been made, the production slowdown keeps Micron in control of the supply, reduces surplus, and ensures better prices.

How to Create an Effective Inventory

A comprehensive inventory strategy that is anticipatorily planned creates a solid base for success. To enhance the supply chain and make getting allocation easier, collaborate closely with strategic suppliers. Engage key supplier connections during times of inflation to ensure appropriate budget allocation since a solid supplier relationship lowers costs by committing to orders in advance.

Additionally, if component lists are transparent, suppliers will be better able to anticipate your demands and make supply offers. To prevent disruptions and added carrying costs, buyers should keep excess supply to a 1-2 month window.

Despite the unpredictability of price adjustments and supply shortages, it is crucial to monitor consumer trends and market movements. Independent distributors with market intelligence teams are especially useful because they may serve as your market’s eyes and ears and provide advice.

Keep the balance in a strategic way.

Utilize every tool at your disposal to maintain stable stocks as you navigate between supply and demand. The best resource for a business is its supply chain, therefore engage closely with them to manage your inventory rather than letting it manage you.


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