Good news! World trade may be rebounding. According to the World Bank, 18 countries reported their trade data for the month of June exhibited an increase in imports and exports. This is the first identified trade increase after five months of severely depressed world trade.
As trade collapsed earlier this year, companies accelerated the depletion of excessive inventories adjusting their outlook to one of a sustained business downturn. Once inventories were stabilized at new lower levels, market analysts predicted that some trade recovery would likely follow. So lies the question: “Is this recent positive trend just a spike or does it reflect a real turning point, with continued growth to follow?”
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This is not the first time (it”s just received more attention because of the magnitude of this economic crisis) that chemical manufacturers and supply chain managers have been confronted with the inventory issues: when to replenish and to what level. It is a question not easily answered.
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Impact of the Global Supply Chain on Inventory
The global supply chain is inherently a process of many handoffs to a variety of service providers who must expertly and timely execute their functional responsibilities to ensure the successful coordination of an international shipment. Assuming no major bottlenecks occur during the management of these handoffs, the timeline from order shipment to customer delivery of chemical products could take weeks, unlike a road or rail delivery that can be fulfilled in a matter of hours or days. The longer delivery time span for an international shipment naturally results in an increase of inventory in transit and greater working capital exposure.
While logistic managers may not be able to accurately predict the ebbs and flow of their global trade to determine future inventory levels, specific transportation management strategies can help minimize and/or control inventory build as global supply chains get longer and more complex.
Web-based transportation management systems, for example, offer a degree of control over supply chain operations that can result in more accurately predicting restocking points and managing inventory levels. By providing real-time visibility of supply chain activities involving customs brokers, freight forwarders, ocean carriers and logistics service providers, On-Demand Global Transportation Management Systems (GTMS) help logistic managers to monitor unscheduled delays that inevitably occur in the long chain of events. Through optimized event management, key logistics personnel are automatically alerted to shipment delays along the extended supply chain, enabling corrective actions to occur sooner to reduce the length of delays and to keep the chain of events on schedule.
Using the tools offered by an On-Demand Global TMS, international managers can proactively optimize operations to:
- Reduce cycle times
- Eliminate excess inventory build
- Reduce supply variability and safety stock
- Minimize expedited shipments
- Reduce stock-outs
As On-Demand Global TMS capabilities expand to support international (import/export) operations, chemical companies have now begun to automate their often manual international supply chain processes to include: freight tendering, compliance, and other logistic processes. Through better event management and online visibility into logistic operations, businesses can more consistently balance inventories, whether the world economy is trending up, contracting or remaining stable.