Blog - Overcoming inventory management hurdles: transforming supply chains for efficiency and profitability

Inefficient inventory management costs businesses around $1.1 trillion globally each year, with retailers alone losing $471 billion annually due to overstocking (WORLDMETRICS.ORG Report 2024). Despite these staggering numbers, over 60% of manufacturers struggle with inaccurate inventory data, and more than 50% of businesses experience inventory-related inefficiencies. These challenges result in inflated inventory carrying costs, which can reach up to 41% of a product’s value, significantly squeezing profit margins.

With inventory mismanagement cutting into profits, it’s clear that businesses—whether in manufacturing or retail—must adopt smarter, more dynamic solutions to stay ahead in today’s fast-paced market. The ability to optimise stock levels, minimise excess inventory, and gain real-time supply chain visibility is critical to operational success. This blog delves into the current challenges industries face and explores innovative strategies that can transform inventory management, helping businesses improve efficiency, reduce costs, and achieve sustainable growth.

Supply chain challenges across verticals

Manufacturing (Automotive, Building Materials, Consumer Packaged Goods (CPG), Food Supply Chain, Industrial Manufacturing)

Manufacturers across industries face several key challenges that impact their supply chain efficiency:

• Demand volatility: Market fluctuations, especially in sectors like automotive and industrial manufacturing, create difficulty in accurately predicting demand. As a result, 60% of manufacturers struggle with inaccurate inventory data, leading to either excess inventory or stockouts.
• Extended lead times: Global sourcing and supply chain disruptions, such as recent geopolitical events such as vessels avoiding the Red Sea and Suez canal and instead re-routing around the Horn of Africa, have increased lead times in the case of the Asia to Europe trade by between 10 and 14 days, initially causing inventory shortages and further due to unreliable schedules causing inventory stock piling.
• Inefficient inventory management: For companies managing complex inventories with thousands of SKUs, tracking product locations and forecasting needs becomes difficult, often leading to excess stock, which can account for 30% loss in annual profits

Retail (Discount Retail, Own Brand Fashion, DIY, Food Retail)

Retailers face their own unique challenges:

• Stockouts and overstock: Retailers lose around $1.1 million per year due to stockouts, while overstocking contributes to billions in lost sales.
• Demand shifts: Fast-changing consumer preferences make it difficult for retailers to anticipate demand, particularly for seasonal or fast fashion products, resulting in inventory misalignment and lost revenue opportunities.

Demand planning fundamentals: Optimising inventory

Demand planning forms the backbone of effective inventory management. When executed properly, it ensures businesses have the right products at the right time and place, while minimising excess stock and avoiding stockouts. Both traditional methods and advanced AI-driven solutions can enhance demand planning by improving forecasting accuracy, optimising safety stock, and managing lead times more effectively. While AI offers more advanced capabilities, these approaches address key inventory challenges such as:

• • • Forecasting accuracy: Traditional forecasting methods relying on historical sales data often fall short in a rapidly evolving market. In response, 65% of retailers plan to increase investment in inventory management technology over the next 12–18 months to bridge these gaps.
    • Safety stock management: Holding excess safety stock ties up capital and increases carrying costs, which can reach up to 41% of a product’s value.
    • Lead time management: With global supply chains facing longer and more unpredictable lead times, businesses need to stay agile and adjust inventory levels as needed.
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Our innovative approaches

• • • Enhanced inventory management: Ligentia’s AI-powered inventory management uses real-time data from customer orders, lead times, and historical trends to highlight inventory over or understocks with exceptional accuracy. By integrating advanced machine learning models, businesses can significantly reduce the risks of overstock and stockouts, maintaining lean inventory while meeting market demand effectively.
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• • • Meeting safety stock levels: Our AI models ensure safety stocks are maintained by factoring in lead time variability, live demand statistics, and supplier performance. This ensures businesses maintain just enough buffer stock to handle unexpected surges or delays, without tying up unnecessary working capital.
    • Proactive lead time management: Ligentia’s real-time visibility tools continuously monitor lead times, alerting businesses to potential delays and recommending timely adjustments in purchasing or stock movements. This proactive approach keeps the supply chain flowing smoothly, even in the face of external challenges.
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With these comprehensive solutions, Ligentia empowers businesses to enhance their inventory management processes, leading to improved efficiency and profitability.

Implementing effective supply chain visibility

In today’s digital age, real-time supply chain visibility is no longer optional—it’s essential for maintaining a competitive edge. According to the WORLDMETRICS.ORG report, 60% of manufacturers cite inaccurate data as one of their biggest challenges, with a lack of visibility being a significant contributing factor.

Why real-time visibility is crucial:

• • • Informed decision-making: Access to up-to-the-minute data empowers businesses to adjust stock levels, reroute shipments, or respond to demand changes in real time, preventing costly disruptions.
    • Cost reduction: Enhanced visibility enables companies to lower operational costs by optimising stock levels, minimising waste, and avoiding overstocking, which is responsible for $471 billion in lost retail sales annually.
    • Enhanced collaboration: Real-time visibility helps eliminate silos between departments, ensuring seamless coordination among sales, procurement, and supply chain teams.
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End-to-end SKU Level visibility with Ligentix:

Our Ligentix platform delivers comprehensive, end-to-end visibility across the entire supply chain. By integrating real-time data on inventory levels, product locations, and lead times, businesses gain the agility to adapt to sudden changes in demand or unexpected disruptions.

Additionally, Ligentix provides critical alerts for delayed shipments, stock shortages, and purchase order exceptions, allowing for swift and efficient action. With these capabilities, Ligentia empowers organisations to enhance operational efficiency, reduce costs, and improve overall supply chain performance.

AI-Driven insights: The future of inventory management

At Ligentia, our Inventory AI goes beyond solving today’s supply chain challenges—it serves as a strategic tool for creating resilient, cost-efficient, and sustainable supply chains. By leveraging advanced AI technology, we empower businesses to navigate the complexities of inventory management with precision and efficiency. Here’s how our approach stands out:

• • • AI-Driven precision: Our AI models optimise global stock levels by monitoring all inventory within the global supply chain, including stock on order, in production, in transit, and at distribution locations. Combined with historic and predicted sales, as well as safety stock levels, this AI allows businesses to maintain inventory levels that meet sales targets while mitigating risks of excess stock or stockouts. By integrating our Maritime AI solutions, we offer best-in-class insights into stock in transit, providing real-time data on predicted arrival dates at ports. This live information helps mitigate shortages caused by delays by enabling businesses to expedite other stock or switch sourcing origins.
    • Automated inventory management: Manual processes are often plagued by errors and inefficiencies. In fact, businesses that rely on spreadsheets and manual methods experience 15% more errors than those employing automated systems. Our automated solutions significantly reduce these inaccuracies, streamlining operations.
    • Sustainability and waste reduction: Excess inventory can lead to a 30% loss in annual profits and generates considerable waste. Our AI tools help align stock levels with actual demand, minimising unnecessary production and storage costs.
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Our innovative approaches

• • • Process automation: Our Inventory AI automates key processes, such as generating real-time stock recommendations. This ensures optimal efficiency and allows thousands of SKUs to be reviewed in a live environment, focusing on inventory that is either overstocked or understocked.
    • Support for sustainable practices: By optimising inventory and reducing waste, our AI-driven tools foster a leaner, more sustainable supply chain. This approach not only improves the bottom line but also aligns with increasing sustainability goals by enabling optimal routing and sourcing of products.
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By integrating these innovative strategies, Ligentia helps businesses transform their inventory management processes, leading to enhanced efficiency, reduced costs, and a sustainable competitive advantage.

Data driven supply chain transformation

As businesses continue to navigate supply chain disruptions and shifting market dynamics, integrating real-time visibility and AI-driven insights is becoming essential to remain competitive. Ligentia’s innovative solutions enable companies to shift from reactive problem-solving to proactive strategic management—ensuring inventory levels are optimised, costs are reduced, and customer satisfaction remains high.

Connect with us today to discuss how our solutions can help you transform your inventory and supply chain management.

Disclaimer:
The statistics referenced in this blog, including figures on inventory management inefficiencies, lost sales, and operational challenges, are sourced from the WORLDMETRICS.ORG Inventory Management Statistics Report 2024. For more detailed insights and data, please visit worldmetrics.org.