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Supply chain operations managers face a very different environment today than they have in the past.
As they contend with post-globalization, natural disasters, new labor pressures and additional factors, leaders must employ new strategies, said Hernan Saenz, global head of the performance improvement practice at Bain & Company.
“The way we have done supply chain in the past is probably not going to work in the future,” Saenz said. As an example, traditional algorithmic approaches to inventory management don’t account for turbulence in the supply chain, he added.
As operations leaders shift toward new ways of managing the supply chain, here are four strategies they can use in 2025 and beyond.
Against the backdrop of current risks, supply chains need to be more adaptable, and having a smaller or well-prioritized portfolio makes it easier to achieve such flexibility. This makes SKU analysis more important than ever, Saenz said.
FDH Aero, a parts distributor in the aerospace industry, has learned this lesson. The company used to buy parts in large volumes when it found a good deal, without considering the value to its own business and its customers.
But in today’s world, with inflation and a higher cost of money, the company shifted its approach, said Bob Loycano, VP of supply chain.
Starting a year and a half a ago, the company began segmenting its inventory, identifying which SKUs are most or least valuable, and which have the highest or lowest velocities.
“It allows us to invest in the right parts and not make terrible investments on the wrong parts,” Loycano said.
Every three months, the company redefines its parts stratification strategy as new contracts come in or others expire. It also uses this analysis process to organize its warehouses so the highest velocity items are closest to the door and items used least often are in the back, Loycano said.
While just-in-time (JIT) inventory can be effective in stable times, “in turbulent environments, it gets you into trouble very quickly,” Saenz said. Therefore, many supply chains dropped JIT inventory strategies early in the COVID-19 pandemic.
“The way we have done supply chain in the past is probably not going to work in the future.”
Hernan Saenz
Global head of the performance improvement practice at Bain & Company
Buffer stock continues to be important in 2025 due to raw material constraints and long lead times in some industries.
