Commentary
Last week we urged veterinary clinics to consider adjusting their quantities on hand and reorder points ahead of the possibility of a UPS strike <Link>. While the strike appears to have been averted <Link>, our assertions were based on information similar to that shared in this article. Many of the Covid-19 pandemic-era supply chain challenges remain unresolved. These trickle down to veterinary clinics, retailers and pet services businesses dependent on the supply networks to replenish key items they use.
Nearly half (44 percent) of all supply chain executives surveyed expect to experience a supply chain shock in the next 24 months as a result of various external challenges including price volatility (46 percent), inflation (44 percent), resource shortages involving labor and materials (42 and 41 percent respectively), and geopolitical instability (32 percent).
Source: Material Handling and Logistics, July 17, 2023. Link.
INSIGHTS: Those of us working in the animal health business 30-plus years can recall placing booking orders. These were designed to help forecast product production prior to a season or future time period (e.g. insecticide ear tags).
In the 1990s with a fast-growing companion animal market, large promotional orders became common with incentives to purchase three or more months of inventory already produced by suppliers and gain a market share advantage; a practice often jokingly called quarter pounders. Fulfillment and logistics were seldom an issue as UPS, FedEx, local carriers along with LTL and OTR trucking companies, competed for package delivery volumes. In that timeframe, many practice consultants advocated letting distributors hold the inventory and deliver it on demand or, just in time; a practice that increased the use of premium-priced air carrier services and consequently raised shipping costs for all.
The efficiency we’ve grown to expect may never be recovered as transportation costs continue to rise. The costs of fleet conversions from fossil fuels to electricity will get assessed to customers and be reflected in the cost of goods downline.” – Kirk Augustine
Here’s how to plan for fulfillment disruptions in the midterm and adjust for fulfillment inefficiencies over the next year or longer.
- First, consider that “0” on hand is not a good reorder point for any items used routinely.
- Second, know that inventory management is about controlling a top-five expense in every practice that deserves a focused commitment.
- Third, use the benefits of home delivery sources for long-term RX and specialty SKU compliance
We recommend empowering inventory managers with enough time to forecast, optimize SKUs and flexibility to situationally increase inventory on hand especially with “A” and “B” products, plus some extra help to routinely recognize, reorder, receive and restock products.”