Small and medium-sized businesses (SMBs) are navigating daily challenges: from geopolitical disruptions and truck driver shortages to rail strikes, port delays, and extreme weather. With so many variables at play, making the seemingly straightforward decision of what and when to order stock becomes anything but simple. If you’re a manufacturer, distributor, or retailer – you need to maximize supply chain efficiency and inventory management to stay competitive. Navigating an intricate web of supplier relationships, fluctuating customer demands, and ever-present risks will always be there – so that’s the way forward? Modern inventory management requires a new approach because traditional inventory practices are not sufficient anymore.
Netstock’s recent Inventory Management 2024 Benchmark report highlights some of the most pressing issues global SMBs face today. Netstock conducted an in-depth global survey with 300 of its SMBs (under $250M in revenue) and also drew insights from anonymized platform data of its 2,400+ customers worldwide. Issues such as slow-moving inventory and related problems such as overstocking goods, carrying costs, and obsolescence were highlighted. Other areas of immediate concern were supplier reliability, nearshoring, and implementing AI-driven solutions.
Keeping up and staying relevant
One of the biggest concerns is the movement of goods. Those that adopt proven inventory management solutions and practices are better positioned to respond to market changes, improve operational efficiency, and meet customer demands. The key is to adopt more agile and resilient strategies using demand and supply planning solutions designed specifically for the SMB’s needs. While many SMBs may need more financial power to invest in sophisticated technology solutions, they should stay up to date on new innovations, trends, and benchmarks influencing their industry so that they can adapt as they grow. If you keep doing what you always do, how will you move forward and stay competitive in an ever-evolving market?
Trends in global inventory management
1. Dealing with uncertainty
Netstock’s research found a definite move towards holding leaner inventories. This is especially evident in North America. Holding fewer goods over the past year is a promising sign. However, while total inventory value dropped 9% year-over-year, nearly 80% of SMBs suffer from a combination of insufficient planning and overstocking.
2. Supplier reliability and rising lead times
Supply chain disruptions are becoming more frequent and can cause a snowball effect. With more breaks in the chain, the longer it takes for suppliers to deliver your goods. The top supplier challenge for SMBs was lead time variability (72%), suggesting that inconsistent or unpredictable deliveries negatively impact optimization more than long lead times (58%). Minimum order quantities (MOQs) can leave businesses stuck with no choice but to order more than what they need or want, putting pressure on cash flow. Ordering the right amount of the right goods, at the right time, can be the “X Factor” in keeping stock turns up and warehousing costs down.
3. Nearshoring and onshoring
Companies are increasingly nearshoring or onshoring production to reduce lead times and mitigate supply risk. This trend requires adjustments in inventory strategies. Netstock’s report notes that American SMBs are shifting production closer to home, with only 25% preferring offshore suppliers. However, China presents an attractive option for many, despite the challenges. SMBs can still make informed supplier decisions to stay cost-effective.
4. Excess inventory
Overstocking is a stubborn problem for many SMBs. There is a tendency to over-purchase to get ahead of future supply bottlenecks. Unfortunately, some of these purchases include inventory that’s difficult to move—expired, out of season, or simply in low demand—and a major burden on capital. Suppliers can be another culprit of excess. Their MOQs leave businesses with a difficult choice: buy too much or buy nothing at all and find another supplier. Of the survey respondents that reported the most excess, over half (51%) also pointed to MOQs as a supplier challenge. Businesses should be wary of going too far in the opposite direction and understocking. Without sufficient inventory, they fall short of customer demand and lose valuable sales, driving revenue down.
5. The artificial intelligence (AI) opportunity
AI continues to dominate headlines and show off its potential across industries, but many growing companies have not yet started their adoption journey. Only 23% of the Netstock survey respondents reported having already invested in AI-driven solutions, and 26% plan to do so in the next 12 months. With AI becoming more accessible than ever, SMBs have an excellent opportunity to ramp up the adoption of cloud-based software solutions that capitalize on this transformative technology.
Practical steps for SMBs in inventory management
SMBs must adopt strategies that align with these trends to ensure that their business remains relevant and competitive. Emphasis must given to the following:
1. Optimize inventory levels
Monitor inventory turnover ratios, carrying costs, and order accuracy rates. These metrics provide insights into how well your inventory management processes are performing and where improvements are needed. An Inventory Management System (IMS) solution offers unprecedented capabilities for inventory monitoring, real-time data analysis, automated reordering, and integration with e-commerce platforms. An IMS provides immediate visibility that helps businesses make better demand and supply planning decisions.
2. Leverage technology and automation
It’s all about speed to market! Evaluate your current inventory processes and identify areas where automation tools can reduce manual work and facilitate easier monitoring of goods across the supply chain. Start with small-scale AI projects to help gradually scale up as technology becomes more accessible and cost-effective. By leveraging innovations such as barcode scanning, RFID and the Internet of Things (IoT), you can enhance visibility, improve stock accuracy, and reduce costs—while responding quickly to market changes and demands.
3. Accelerate demand forecasting
Demand planning and forecasting techniques will help SMBs achieve and maintain the optimum stock levels. Finding that perfect spot between enough and too much stock is not easy. The goal is to strike a balance between always having sufficient inventory levels to meet customer needs without overstocking and creating obsolescence. Collect and analyze sales and inventory data to establish a baseline for demand forecasting. Use this data to make more informed purchasing decisions. Use predictive analytics tools to forecast demand based on historical sales data and market trends.
4. Build supply chain resilience
Maintain safety stock of critical items to cushion against unexpected demand spikes or supply chain disruptions. Establish minimum and maximum stock levels for essential products to maintain a buffer without overstocking. Reduce dependency on a single supplier by diversifying your supplier base. This helps mitigate risks such as delays or price fluctuations, ensuring more stable inventory levels.
Adopting these strategies can improve inventory management, enhance operational efficiency, forecast demand more accurately, and navigate the complexities of the modern supply chain.
The future of inventory management for SMBs
Advances in technology are reshaping inventory management. As these trends evolve, SMBs should prepare for changes that will redefine how they manage inventory, interact with suppliers, and meet customer demands. For SMBs, staying competitive will require embracing these innovations:
Increased use of AI and machine learning (ML)
AI-driven systems will improve demand forecasting by analyzing vast datasets, including customer behavior, market trends, and external factors like weather or economic conditions. AI will also enable more automated decision-making in inventory management: adjusting orders, managing lead times, and responding to changes in real-time without manual intervention.
Automation and IoT
The use of advanced robotics in warehouses will increase, with robots handling tasks such as picking, packing, and transporting goods. These systems will work alongside human workers to enhance productivity and accuracy in inventory management. IoT will continue to revolutionize inventory management by enabling real-time tracking of goods using sensors. The real-time data generated by IoT devices will feed into analytics platforms, offering deeper insights into inventory levels, turnover rates, and customer preferences.
Circular Supply Chains and Sustainability
The future will see a shift towards environmental awareness and circular supply chains. Inventory management systems will need to accommodate reverse logistics, where goods are returned, refurbished, or recycled rather than discarded. SMBs will need to prioritize sustainability, track their carbon footprint, reduce waste, and optimize resources to meet consumer demand for eco-friendly practices.
Distributed warehousing
To meet the demand for faster deliveries, companies are increasingly using distributed warehousing models, where inventory is stored closer to the end customer. This approach reduces delivery times but requires more advanced inventory tracking and management
Impact on the workforce
Software solutions are already changing the way we work: the focus has shifted from manual labor to more skilled, tech-oriented roles. Businesses need to embrace continuous learning and find ways to integrate human skills with system advancements and automation effectively. This will be the key to creating a productive, safe, and satisfying work environment in the warehouse.
Adapting to inventory trends for success
The trends in inventory management highlighted in Netstock’s Inventory Management 2024 Benchmark report are eye-openers for SMBs. Minimizing Inventory without compromising business operations should always be regarded as a best practice and incorporated into the company culture.
Uncertainty and disruptions in supply chains will always be with us. Resilience is the key. Data analytics and developments in software solutions are the enablers to drive a new era of how SMBs optimize their inventory.
