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Distributed inventory management

Distribution Inventory Management (DIM) – A Complete Guide

To survive in this fast-paced world, businesses need to be agile and adaptable enough to stay competitive. One key aspect of this is managing the inventory in a way that paves the way for responding to changing customer demands and market trends.

That’s where distributed inventory management comes into play – it enables businesses to track and manage their stock levels in multiple locations.

But what’s the benefit of it and how you can manage a distributed inventory with ease?

We will explore all about distributed inventory management below.

What is Distribution Inventory Management?

When you store your inventory in multiple locations, it is called distributed inventory. Whereas, the process of managing your inventories is called distribution inventory management. 

This is a process adopted by retailers who operate in multiple geographic locations or deal in a wide range of products. Using this strategy retailers can distribute their inventory on multiple occasions including warehouses, retail stores, and distribution centers.

How does Distribution Inventory Work?

One strong reason why retailers need a strong DIM strategy is to ensure their products move quickly and efficiently. Ideally, a retail planning solution is needed to track the inventory across every store location.

Not only does the planning software help in providing a real-time view of your inventory but it also helps in deciding which products to store at which location.  It can be the ultimate way for retailers to conduct a range planning for their business.

Benefits of Distribution Inventory Strategy

The approach to distributed inventory management benefits retail businesses in multiple ways. Some of them are mentioned below:

Reduced Transportation Cost

When you place your inventory strategically at multiple locations, you can ship the products from the inventory near to the key market. It helps in significantly reducing the cost of moving goods over a long distance.

This process is specifically beneficial for goods that have high transportation costs or require swift delivery.

Improved Customer Experience 

When you have a distributed inventory across multiple locations, it enables you to fulfill the order quickly and without any hassle. When your business is positioned for reduced shipping time it is bound to enhance customer satisfaction and increase customer loyalty.

Moreover, with distributed inventory, you can have inventory in key markets that reduce the risk of stock out and backorders.

Mitigate Risk & Disruptions

A centralized inventory system is associated with various risks including natural disasters, supply chain disruptions, geopolitical events, etc. These disruptions can be a big setback for retail businesses resulting in customer loss and reputation damage.

Businesses can mitigate these risks by diversifying their inventory locations. So even if one location has certain issues the order can be fulfilled from another inventory, ensuring a steady flow of operations.

Lower Inventory Cost

While it’s true that a distributed inventory system has additional storage expenses compared to a centralized inventory, it still can have lower overall inventory holding costs.

When you strategically place inventories in demanding areas, it reduces the need for excess safety stock, while also minimizing the cost of holding inventory.

Optimized Demand Forecasting

When you have a distributed inventory system at various locations, you can have valuable insights into regional demand, patterns, and preferences.

This granular view paves the way for more accurate demand forecasting and planning. Additionally, it helps in improved inventory turnover, reduced excess inventory, and reduced obsolescence.

Challenges in Distribution Inventory Management

While there are multiple benefits of distributed inventory management, there exist major drawbacks as well. It includes:

  • Infrastructure Configuration
  • Fulfillment Complexity
  • Data Security
  • Reverse Logistics
  • Supplier Management

Tips for Effective Management of Distributed Inventory

Having a distributed inventory can be an extremely complex strategy. However, with detailed planning and implementation, businesses can successfully keep up with the challenges and gain an advantage.

Centralize Inventory Information

Having a centralized system helps you keep a check on inventory across multiple locations. You will always be aware of what’s going on since you will receive real-time updates on stock levels, incoming shipments, and outgoing orders. 

All of this can be done with just one source, which gives you visibility and helps you decide when and how much to reorder.

Inventory Control Procedure

It’s critical to set up precise protocols for receiving, holding, and transporting inventory across multiple locations. 

Establish defined procedures that will instruct your staff on how to precisely document inventory movements. Carry out routine inventory counts and address any disparities that may emerge. 

Having these protocols in place ensures that everyone is on the same page, which is vital for preserving accuracy and minimizing errors.

Optimistic Demand Forecasting & Planning

Accurate demand forecasting is critical for efficient inventory management. 

Examine your previous sales data, market trends, and customer behavior to gather insights and generate accurate projections about future demand. Understanding your consumers’ preferences and behavior allows you to change your inventory levels accordingly. 

This keeps you from having too many goods on hand, reducing excess inventory and eliminating annoying stockouts that leave your consumers empty-handed. 

Conclusion

Distributed inventory management is an essential aspect of modern supply chain management. It enables businesses to streamline their inventory management processes, reduce costs, and improve customer satisfaction. By leveraging technology and data analytics, businesses can optimize their inventory levels, minimize stockouts and overstocking, and ensure a steady inventory flow.