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Post-Pandemic Inventory Management

The COVID-19 pandemic and subsequent supply chain disruptions upended supply chains and caused inventory shortages followed by excess inventory challenges.  As companies toil to redesign their approach to inventory management, a look at related commercial contracts will also be key.  Commercial contract provisions should match the business strategies of the supply chain players, so that the contractual parties agree to any needed volume requirement, safety stock, bailment, and service level agreement provisions (just to name a few).

It’s March 2020. Store shelves sit empty, without any toilet paper or cleaning supplies in sight. Tablets and electronic devices are out of stock. Consumers are clamoring for the basics they need to suddenly work and learn from home and live under quarantine. Meanwhile, on Zoom calls and in email threads, company leaders around the world are racing to put in giant orders with their suppliers to speed up supply-chain lags and get products to customers. In the supply-and-demand equation, demand seems infinite. Now, three-plus years later, we’re seeing the stark aftereffects of that spike in demand. After the race to order key components and manufacture products, suppliers are left with mountains of excess inventory as growth has slowed to normal levels.