Supply-Side Dynamics: What COVID-19 taught us about just-in-time inventories
We all know that brick-and-mortar stores—and even online platforms—were caught high and dry during the early days of COVID-19, when consumers stormed the barricades and stocked up on everything in advance of what they feared might be a really long time of sheltering in place—if not Armageddon.
And did we learn from the experience?
“We could talk about this for hours,” says Lisa C. Buono, principal, healthcare practice, IRI (Chicago). And analysts will be talking about—and analyzing—it for years. But it’s apparent that the pandemic “blew apart” the just-in-time supply chains that businesses had honed to a science over the past few decades, in both the supplement sector and beyond.
As Buono explains, while retailers traditionally kept two to three months of inventory in distribution centers—and, in the case of seasonal supplements like vitamin C, echinacea, and similar cold-fighters, sometimes more than four months—“more recently, both retailers and manufacturers have generated profits and saved money by creating and running really tight supply chains.”
But when demand surged beyond those thin cushions last spring, all nodes in the supply chain suffered. Thus, Buono says, “If I were in management at a retailer or manufacturer, I’d look selectively at my items and how consumers use them—their consumption rates—and then decide whether or not to keep higher inventory levels on certain items to prevent them running out.”
She’s not sure whether management’s actually doing this, and she wagers that with sophisticated, big-data-driven AI systems keeping an eye on purchase patterns, retailers may not have to.
So any immediate swelling of inventory in response to the pandemic may be short-lived, and companies may soon return to the tighter, more efficient supply chains they cultivated before it—with fail-safes built in. After all, Buono says, “There’s just too much money to be saved not to revert to such controls.”