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Just a few weeks ago, the mainstream media began to cover climate change in greater depth than ever before. Following a report from The White House on how climate change is affecting every region of the US, most Americans now understand that climate change is real. Interestingly, the retail industry is ahead of most sectors in addressing climate change, a topic we are covering in this blog. In this post, we take a look at how climate change impacts inventory control and management.
Throughout the world, Earth’s changing climate has caused temperatures and sea levels to rise, storms to become more frequent and severe, growing seasons to shift, drinking water to become more scarce and land to become less stable. These changes affect the food supply, health and living conditions of us all, but especially of the world’s poor and near-poor, many of whom produce the garments we wear, mine the raw materials we use and work in the nations where we source key products. Here are three ways these changes affect inventory management.
1) Disruptions in deliveries. Whether moved by train, truck, air or ship, storms and abrupt changes in the weather delay deliveries and sometimes destroy cargo. Buying trips are delayed. Inventory may not arrive when retailers need it.
2) Factory conditions, already bad in many nations, are likely to worsen. Travel to and from work will be more difficult for workers, especially those in the developing world. There may not be enough drinking water or food to sustain workers and maintain their productivity. Disease, particularly malaria, will increase. Worse than merely arriving late, your inventory may not arrive at all.
3) When poverty worsens in response to climate change, other problems are exacerbated. These include increases in conflict, crime and piracy. Black markets, graft and theft raise the price of goods and may also lower their quality. Perishable products like fruits and flowers and fragile items such as china and stemware are more likely to arrive spoiled or damaged.
Actions to Take
1) Review traditional formulas for inventory turn and order control. Identify the 20% of your inventory that drives sales, then reduce or don’t stock the 80% that doesn’t. Narrower inventory is easier to source and to manage.
2) Along similar lines, examine the ways you balance inventory levels against possible stock outs. If you are losing sales because customers won’t tolerate back orders, perhaps you need to accept a lower turn. Figure out which costs more, carrying larger inventories or missing out on sales due to stock outs.
3) Develop multiple sources for each product. Try to identify sources in various parts of the world so that bad weather or armed conflict in one area don’t make it impossible to obtain a popular item.
4) Investigate alternative distribution locations. Adding regional warehouses may raise top line costs, but having secure inventory, reducing fuel costs and offering prompt delivery to customers could increase sales and profits.
5) Ditto for investments in technology that streamline distribution, increase product tracking and decrease the risk of wayward inventory.
Some businesses have taken these or related actions and achieved good results. However, the lion’s share of adaptive innovation to climate change has occurred in the area of supply chain management, which we’ll look at in an upcoming post.
About Gevril Group
Gevril Group, watchmaker and wholesale watch distributor, is the exclusive U.S. agent for exquisitely designed and crafted European luxury and fashion watch brands, distributing and servicing some of the best affordable luxury and Swiss watches and trendy fashion watches. Gevril Group also operates a full-service watch repair, staffed by master Swiss watchmakers. Contact Gevril Group by email or by calling 845-425-9882.
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