Inventory Management in the COVID-19 pandemic

By Tiago Martins

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It is already known that effective inventory management is necessary in order to avoid losses and consequently increase the profitability of a business. But still, we can see many challenges from industries and retailers in general.

Obviously, inventory management is directly linked to other variables in a production chain, with logistics, in terms of the supply chain, one of the most critical.

Even so, why have many Brazilian industries and retailers, experienced in inventory management, been greatly impacted by the arrival of the coronavirus in the country? It is known that there has been, and still is, in the last few weeks a high rate of rupture of raw materials, in the case of industries, and products on gondolas at retailers.

The answer is simple: No one was prepared for the COVID-19 pandemic.

Even the largest economy in the world, and the most developed in inventory management, the United States, is suffering consequences and showing signs of weakness with regard, for example, to the meat supply chain in the country. Proof of this is that facilities are being closed, such as the Brazilian JBS slaughterhouse in Greeley, Colorado, where a 78-year-old employee died of the coronavirus.

Not that the US is running out of products, but the empty shelves reveal that the supply chain is under pressure and that the government and industry have to resolve the issue together.

The same happens here in Brazil and perhaps the culture of operating without stock in the “just in time” (production management system that determines that everything must be produced, transported or purchased at the right time) contributes to the lack of products on the shelves. the fluctuation in the supply chain enhanced by “phenomena” such as the COVID-19 pandemic.

And what to do then? How can nations resolve the issue of supplying their populations and prevent the already critical situation from becoming even more worrying? Increase inventories? Or is it better to have followed what happened in China and Europe, and to predict that it would not be different or even worse here, taking into account the size of Brazil?

Should they have considered the distances between producers, distributors and consumers, spread over more than 8,5 million square kilometers in the country?

In my opinion the answer is quite “abstract”, but it is worth reflecting not only in terms of business and economics, but also for the look that must be given to human beings, and to society.

Both businesses and people, need to “reinvent” themselves very quickly, efficiently and creatively, they need to come up with unimaginable situations like the one we are all living in the 21st century.

Simple task? Of course not! But it serves as a lesson for everyone and encourages us (companies and society) to stay in our comfort zones (“It always worked that way.”).

And that industries and retailers are able to arrive at the best model of crisis prevention and management with regard to their supply chains, doing everything to avoid the lack of products for consumers again and thus contributing to the improvement of morale and sense of care together to a whole society.

Tiago Martins is a Consulting Partner at HLB Brasil.

Tiago Martins

Consulting Partner

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