What the Ag retail value chain needs to build more inventory resilience
John Brubaker
Inventory: it can get messy, quick. It’s always a delicate balance between keeping enough on hand to meet demand — and avoiding gluts of extra product you can’t move quickly enough.
Add in the ups and downs of an Ag economy that has experts shaking their heads, and inventory hiccups can be disasters waiting to happen in the Ag retail supply chain. At a minimum, those hiccups can shave off margin points right when businesses need them the most.
Inventory struggles can run the gamut for distributors and retailers, including:
Carrying over too much product from year to year
Not knowing how to move all that extra product from last year
Getting hit with too-high growth targets from supplier partners
An overall down Ag economy, which causes farmers to purchase differently — including purchasing less
On the supplier side, “inventory” can be a dirty word too. Manufacturers often struggle with:
Channel inventories remaining high at the end of a market year but still needing customers to bring in products during fill programs to reach internal targets and to secure shelf space with their customers
Constantly thinking a year in advance and trying to set up the channel for next year — all while keeping your head above water in a fluctuating Ag economy with thin margins
In practice, this swirl of challenges can look like this: Distributor A is carrying over extra inventory of several products from different suppliers. To price competitively, that distributor will need to max out all the rebate programs offered by each of those suppliers.
But many of those programs are “fill programs” — which require the distributor to bring in more products to hit a target and earn their incentive. To meet those goals, the distributor will have to be highly strategic about which programs from which manufacturers to max out, so they don’t continue to pile on top of their existing inventory glut.
No pressure!
In any industry that buys and sells physical products, inventory problems may always be a concern. But there are steps agribusinesses can take to build a stronger foundation so that those inventory hits don’t have to feel quite as hard — and so they can more easily identify opportunities in the marketplace.
How to navigate market fluctuations and put your business in better position to succeed
No matter where you are along the Ag input value chain, there are things inside and outside your control.
The ag economy, for example? Commodity prices and overall farm revenues? Definitely not in your control.
If you’re a retailer or distributor, you also can’t change growth targets set by manufacturers.
And if you’re a manufacturer, you can’t shift the macro-level purchase trends by growers (like buying less in a down economy).
But you can control your systems, technology investments, and decision-making. And even in times like these — when the Ag economy predictions remain low — it’s time to get your ducks in a row and put the structures in place that will help you take advantage of opportunities when they do happen.
For instance, if you’re a distributor or retailer, ask yourself these questions:
Do your current systems provide enough data for you to make confident choices about which rebate programs to pursue?
Do you have real-time data visibility to help head off future inventory problems?
Do your current digital tools optimize your pricing communication, so your sales team can efficiently sell off what it needs to?
If you’re a manufacturer, ask yourself these questions:
Does your internal technology give you real-time sales supply chain visibility?
Do you have a true, real-time view of your nets?
Do you have tools that can segment your customers based on historical purchase data so you can more strategically incentivize selling certain products?
As the Ag economy fluctuates, being able to answer “yes” to all these questions will be more important than ever. There are opportunities available, even in a chaotic or down economy. But you must have the structures in place to help you identify and pursue those opportunities — and that can help you keep an eye on inventory and avoid shortages or gluts.
At the very least, having better systems and tech in place can help you maintain margins. In an era where everything feels squeezed, every tenth of a point counts.
How Smartwyre helps retailers, distributors, and manufacturers navigate uncertainty
The Smartwyre platform is not an inventory management tool. But it does give you the data foundation you need to more savvily navigate potential inventory challenges — and pursue marketplace opportunities as soon as they appear.
This looks like:
Distributors and retailers better understand their true costs, pricing more appropriately to their customers, and maximizing their rebate earnings.
Manufacturers visualize trends better, building more customized programs, and driving more sales. Smartwyre also helps retailer partners better understand their nets — so they can better position themselves to sell the supplier’s products at the farm gate.
If you’re ready to shore up your internal systems and technology to better navigate economic uncertainty, be ready for future inventory challenges, and identify market opportunities more quickly, reach out to the Smartwyre team today.
