You're managing limited inventory in a supply chain crisis. How do you decide which orders to prioritize?

1 Customer Value

Understanding the value of each customer is crucial when inventory is scarce. Prioritize orders from customers who have a long-term relationship with your company or those who place large, consistent orders. These key accounts are often the backbone of your business, and maintaining their satisfaction is essential for long-term survival. Additionally, consider the strategic importance of new customers who may represent significant future business. Balancing the needs of established and potentially valuable new customers will help you navigate the crisis effectively.

2 Order Size

The size of an order can influence its priority level. Large orders might seem like the obvious choice to prioritize due to their potential revenue. However, fulfilling only large orders could alienate smaller customers who may collectively represent a significant portion of your business. On the other hand, smaller orders can sometimes be completed more quickly, keeping a steady flow of products going out and revenue coming in. Evaluate the implications of order size on your production capacity and financial health to make the best decision.

3 Profit Margin

In times of limited inventory, focusing on orders with higher profit margins can help sustain your business. These orders contribute more to covering fixed costs and maintaining profitability. It's important to analyze the profit margin of each product and prioritize those that will give your business the best financial boost. However, this doesn't mean neglecting less profitable products that are vital to your customers; rather, it's about finding the right balance to maximize your limited resources.

4 Lead Times

Lead times, or the time it takes to fulfill an order from the moment it's placed, play a significant role in prioritization. Orders with shorter lead times might be easier to prioritize because they can be turned around quickly, potentially improving cash flow. Conversely, orders with longer lead times may require more planning and resources. Consider how adjusting lead times can help manage customer expectations and make the most of your inventory.

5 Supply Chain Stability

Assessing the stability of your supply chain is crucial. Prioritize orders that can be fulfilled with the inventory on hand or with materials that are reliably available. If certain components are subject to delays or shortages, orders requiring those parts might need to be deprioritized until the supply chain stabilizes. This approach helps avoid committing to orders that you may not be able to fulfill on time, which can damage customer relationships.

6 Strategic Importance

Lastly, consider the strategic importance of each order. Some orders may be critical to entering a new market or supporting a strategic business initiative. Even if these orders are not the largest or most profitable, they may warrant prioritization due to their long-term significance. Balancing immediate financial needs with strategic business goals is key to navigating a supply chain crisis successfully.