Fill Rate vs. In-Stock Rate: Rethinking How Distributors Measure Service Performance

Fill Rate vs. In-Stock Rate:
Rethinking How Distributors Measure Service Performance

Why strong service metrics can still hide lost sales

Many distributors report strong fill rates. On paper, the service looks good.

Yet those same businesses still face incomplete orders, frustrated customers, and lost sales. The problem isn’t effort or intent; it’s how service is measured.

Fill rate is widely used, but it tells only part of the story. Without an in-stock rate for context, it can create false confidence, hiding inventory gaps that hurt sales and customer experience.

Knowing the difference between these two metrics is crucial for any organization that wants to improve service without just piling on more inventory.

Fill rate: a measure of fulfilled demand.

Fill rate measures how well inventory meets demand.

If a customer orders 100 units and 95 are available, the fill rate is 95%. You can measure fill rate by quantity, revenue, or at the order level. Each approach offers a different perspective, but they all answer the same question: how much demand did we satisfy?

That makes fill rate useful for operations, but it has limits. It only reflects sales that happened, not the demand you never saw.

In stock rate: a measure of demand readiness

In-stock rate approaches the problem from a different angle. Rather than focusing on what was sold, it evaluates whether inventory was available when demand was likely to occur.

This usually means weighting items by recent activity, such as how often they sold or how much revenue they generated over a set period. The result is a metric that shows how well inventory is set up to meet expected, not just observed, demand.

Importantly, the in-stock rate captures the impact of stockouts even when no transactions occur. If a frequently purchased item is unavailable, the metric reflects that gap regardless of whether a customer attempted to buy it.

The gap: where performance appears strong but is not

This distinction becomes critical in environments where demand is not fully visible.

Consider a distributor that doesn’t accept back orders. Fill rate might always show 95% or better, but the business could still be out of stock on important items.

Customers quickly learn which items aren’t reliable. Instead of placing partial orders, they wait, buy elsewhere, or just give up. None of that lost demand shows up in the fill rate.

The in-stock rate corrects for this by penalizing stockouts for items with recent demand history. It highlights gaps that would otherwise remain invisible in traditional reporting.

How measurement choices can distort reality

Even when both metrics are tracked, how they are constructed can lead to misleading conclusions.

A revenue-weighted in-stock rate might look good if high-value items are always available. But that can mask the limited availability of low-cost, high-frequency items that customers rely on to complete their orders.

For example, a contractor might be able to buy an expensive part, but if the supporting pieces are missing, the order falls through. To the customer, service failed, no matter what the metric says.

Similarly, quantity-based fill rate might look fine, but order-level fill rate could show that full orders often go unfilled. Each metric is accurate, but neither alone tells the whole story.

From measurement to action

The real value of these metrics isn’t the report; it’s how they guide your decisions.

When you track fill rate and in-stock rate together, patterns emerge. You can see where demand is missing, where inventory is off, and where buying decisions aren’t matching how customers shop.

That’s when a structured approach to inventory optimization matters. By pairing detailed demand analysis with practical tweaks to purchasing, lead times, and restocking, companies can address the real causes of service gaps rather than just react to symptoms.

Closing thought

Service level isn’t just a number. It’s about how well your inventory actually supports everything your customers want.

Fill rate is still important, but without the in-stock rate, it only tells part of the story. Companies that measure both and understand what each means can improve service, reduce excess inventory, and capture missed sales.

The difference is subtle, but the impact is big. It’s the gap between thinking service is strong and actually knowing where to improve it.

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Why is forecasting not a model problem

Why Forecasting Is
Not a Model Problem

Rethinking demand planning in modern supply chains

Most supply chain teams treat forecasting as a technical challenge. The question is usually: what is the best model? But that framing misses the real issue.

Forecasting is not a model problem. It is a decision problem. The real challenge is translating demand patterns, business inputs, and operational constraints into purchasing actions. That is why a single forecasting approach almost always fails.

The myth of the single forecast

Most companies already have a forecasting process, even if they do not recognize it. In many ERP systems, the forecast is simply an average of recent demand. That number drives reorder points, purchasing quantities, and inventory targets.

This creates a hidden assumption: one method can represent future demand across the entire catalog. In practice, this is rarely true.

A distributor’s catalog contains stable high volume items, seasonal products, trending items, and sporadic long tail demand. Each behaves differently. Yet most organizations apply the same forecasting logic across all of them.

The result is predictable:

Underbuying in some areas
Overbuying in others
Inconsistent service levels
Excess and aging inventory

Why traditional approaches fall short

A simple average of recent demand is appealing because it is easy to implement. But it breaks down quickly in real operating environments. It does not capture seasonality. It lags behind trends.

It also assumes recent demand reflects future demand. That assumption fails when the business context has changed. The most common failure modes are:

Planning off low season demand heading into a peak period
Continuing to buy based on past strength when demand is declining
Reacting too slowly to real changes in customer behavior

These issues worsen as lead times increase. When purchasing must cover multiple months of demand, small forecast errors are amplified. Traditional methods also perform worst in the long tail, where most excess inventory resides.

Many organizations respond by moving to more advanced methods. Models like exponential smoothing, ARIMA, and ETS can handle trend and seasonality better than simple averages. In certain scenarios, they improve accuracy. But increased sophistication does not guarantee better outcomes. These models introduce more parameters and more complexity. It is common to gain precision in calculations while losing accuracy in results. No single model performs well across all demand patterns.

Forecast accuracy depends less on the model and more on the quality of inputs. Two of the most common distortions are stockouts and promotions. Stockouts suppress recorded demand. Promotions inflate it. If these are not corrected, every forecasting method will produce misleading outputs. A stockout period can make demand appear to drop to zero. A temporary promotion can create the illusion of sustained growth. A simple method applied to clean data will often outperform a sophisticated model applied to distorted inputs. Most forecasting initiatives fail here. The focus goes on selecting the right tool rather than ensuring the data reflects reality.

What AI and probabilistic forecasting actually change

Recent advances in AI have introduced new forecasting capabilities. The most important shift is the ability to model uncertainty, not just produce a single point forecast.

Traditional methods produce one number: an average expectation. But inventory decisions are made with risk in mind. Modern approaches estimate the probability of different demand outcomes. Organizations can ask what inventory position supports a target service level and where overstock or stockout risk is concentrated.

This is a meaningful shift. Even so, the same principle applies. Advanced AI models produce poor results when inputs are flawed or business context is missing.

What good looks like in practice

Organizations that improve forecast performance do not rely on a single model. They build a framework that aligns demand behavior with decision making. At a high level, this means:

Segmenting items by demand pattern and lead time
Applying different forecasting approaches to different segments
Correcting inputs for stockouts, promotions, and anomalies
Aligning forecasting outputs with service level and inventory objectives

The goal is not a perfect forecast. It is consistently better purchasing decisions.

Hydrian's Take

Fix your inputs before upgrading your models
Distorted data produces distorted forecasts regardless of the method used. Audit your demand data for stockout periods and promotional spikes. Correct them before they feed your planning process.
Segment your catalog and match the right approach to each item
Stable high volume items, seasonal products, and sporadic long tail items all behave differently. Applying one forecasting logic across all of them is the most common and most costly mistake in demand planning. Map your catalog by demand pattern and apply the right approach to each segment.
Shift the goal from forecast accuracy to better purchasing decisions
Accuracy is a means, not an end. The real measure of a good forecasting process is whether it improves service levels and reduces excess inventory. Build your framework around that outcome. Use uncertainty modeling to understand where the real risk sits in your inventory.

If this reflects challenges you are working through in your own planning process, we would be glad to take a look. Reach out to start a conversation about where your current forecasting approach may be leaving performance on the table.

From single forecast to service level planning

Forecast COGS ($) Coverage per Week

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When the Weak Link Is Upstream: Tackling Supplier and Sourcing Challenges in 2025

Summary

In 2025, the greatest supply chain risks no longer sit in warehouses or ERP systems — they sit upstream. Distributors and manufacturers are discovering that supplier reliability, visibility, and sourcing strategy now determine resilience as much as forecasting accuracy does. This article explores how leading firms are addressing those challenges through measurable performance, transparency, and smarter sourcing decisions.

Main article

For years, distributors and manufacturers have invested heavily in getting their own houses in order.
Forecasting accuracy improved. Replenishment routines became more disciplined. Transfers, safety stocks, and service metrics were tuned with precision.

Yet 2025 has made one thing clear: even the most sophisticated internal systems can’t overcome the fragility of an unstable supply base.
The real source of volatility now lies upstream — in the reliability, visibility, and adaptability of suppliers.

Reliability: The foundation of every partnership

Collaboration between buyer and supplier only works when predictability is in place.
Across many industries, that foundation has cracked. Purchase order data tells a consistent story: shipments are consistently late, quantities are consistently short, and lead times are consistently unpredictable.

These disruptions force purchasing teams to compensate. They place extra orders “just in case,” inflate safety stocks, and hold inventory longer than planned.
The result is more working capital tied up in slower-moving goods — all while customer service still suffers.

Reliability is often treated as an assumption, but it should be a metric that is measured and evaluated. Tracking on-time delivery, fill rate, and lead-time variability across suppliers provides teams with early warning of potential slippage. It also reframes supplier conversations around performance data, not anecdotes.

Reliability isn’t a courtesy — it’s the foundation on which every downstream improvement rests

Visibility: The blind spot beyond Tier 1

Most companies can describe their Tier-1 suppliers in detail — who they are, where they are located, and what they provide.
But that’s where visibility usually stops.

Actual supply-chain risk rarely lives at Tier 1. It lies deeper, in the sub-suppliers that provide raw materials, packaging, or specialized inputs.
When one of those nodes falters — perhaps due to labor shortages, transport bottlenecks, or export restrictions — the disruption moves silently up the chain until a promised delivery date suddenly slips.

Extending visibility one or two tiers deeper doesn’t require complex technology. It starts with structured conversations:

Who are your key sub-suppliers?
Which ones have limited capacity or single-source dependencies?
What contingency plans exist if they fail?

This kind of transparency transforms supplier management from a reactive to a proactive approach.
Even partial visibility allows buyers to identify which relationships carry the most risk — and which are ready to scale when demand surges.

Diversification: The illusion of independence

The push toward “China + 1” sourcing was meant to strengthen resilience.
But diversification often stops at appearances.

Many “new” suppliers still depend on Chinese inputs or shared logistics infrastructure, creating a mirage of independence.
A company may have multiple vendors, but if all roads lead back to the same bottleneck, risk remains concentrated.

This illusion becomes clear when a single raw-material shortage or port closure halts supposedly diversified product lines.
The lesson: diversification is not a vendor-count exercise — it’s about independent supply paths.

Simple mapping exercises can reveal overlap across the supply base.
Once identified, buyers can assess which materials or components warrant a deliberate dual-sourcing strategy and which can be single-sourced with adequate safety stock.
Both approaches are valid — the key is knowing which applies where.

Re-shoring: Promise and pragmatism

Re-shoring and near-shoring have gained momentum, spurred by tariff uncertainty, freight volatility, and a renewed appetite for control.
In theory, shorter supply lines mean faster response and fewer shocks. In practice, the picture is mixed.

Domestic and regional suppliers often face higher labor and energy costs, capacity constraints, and infrastructure limitations. They can offer proximity but not necessarily predictability.
Lead times may shorten, but flexibility can narrow — and cost advantages disappear quickly if capacity runs tight.

Re-shoring works best when treated as a portfolio decision.
Not every product or component needs to be brought home.
Firms are finding success by identifying which categories benefit from proximity (high-value, high-volatility items) and which still justify offshore sourcing (stable, low-margin lines).
The balance between cost, capability, and control varies by sector — and requires ongoing review as trade and tariff conditions evolve.

How leading firms are responding

Across the distributors and manufacturers navigating these challenges successfully, several standard practices stand out:

They quantify supplier reliability.
On-time performance, fill rate, and lead-time variability are tracked and reviewed regularly, not just in response to a crisis.
They extend visibility upstream.
Even limited sub-tier mapping provides an advantage — identifying dependencies before they turn into disruptions.
They model multiple scenarios.
Lead-time extensions, cost swings, and tariff shifts are simulated against current inventory strategies to understand exposure.
They diversify deliberately.
Instead of spreading orders thinly, they maintain defined dual-sourcing strategies where the value justifies it.
They treat sourcing as dynamic, not fixed.
Supplier portfolios are adjusted as cost, capacity, and geopolitical factors change — avoiding both overreaction and inertia.

These behaviors don’t rely on expensive systems; they depend on discipline and cross-functional coordination.
In that sense, the firms succeeding in 2025 are not just managing suppliers — they’re controlling information flow.

The broader lesson — supply chain resilience begins upstream

The conversation around inventory optimization, fill rates, and transfer cadence often centers on what happens inside a distributor’s four walls.
However, those outcomes are only as stable as the inputs that feed them.

When supplier reliability falters, every downstream decision — from reorder timing to safety stock to service level — becomes a matter of guesswork.
When upstream visibility is limited, planners react to symptoms rather than causes.
And when diversification is superficial, resilience becomes an illusion.

The path forward is neither extreme localization nor blind globalization.
It’s a balanced, data-driven approach to supplier performance, visibility, and sourcing strategy — one that turns upstream volatility into a manageable, measurable variable rather than a constant surprise.

The supply chain’s weakest link may be upstream, but it’s also where the most substantial improvements can start.

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Managing cost volatility through inventory discipline

Summary

Cost volatility isn’t going away, but exposure can be managed. This article examines how disciplined inventory practices convert uncertainty into control, transforming inventory from a passive cost into an active tool for protecting margins.

Main article

Tariffs often take the blame for rising costs, but they’re only one of several forces disrupting margins. Commodity prices fluctuate, freight rates swing, and supplier lead times shift with little warning. Even when markets calm, energy costs, exchange rates, and global disruptions can quickly erode predictability.

For purchasing and supply chain teams, volatility has become a constant, not an event. And while it’s tempting to focus on forecasting where costs are headed, the real question is: how much risk are you carrying if they move against you?

That’s where inventory comes in.

Every extra day of stock you hold is a position you’ve taken on the future. If costs rise, your current inventory suddenly looks cheap. If they fall, you’re left holding a product that’s instantly worth less than you paid. Either way, inventory amplifies the impact of volatility, for better or worse.

Inventory is price risk. The challenge isn’t predicting what will happen next; it’s managing your exposure when it does.

The nature of cost volatility

Six major factors drive most cost movement today:

Tariffs and trade rules
Commodity prices
Energy costs
Freight rates
Exchange rates
Supply disruptions — from ports to geopolitics

No company can consistently predict how these will behave. Studies of procurement teams show that even experienced buyers rarely call cost direction correctly over a six-month window.

If prediction isn’t reliable, what is? Visibility and control. That means understanding how much exposure your business carries, and using inventory management as the mechanism to contain it.

Inventory as exposure

Inventory converts external volatility into internal risk. When costs are rising, holding inventory on hand is a winning bet. But if prices fall, it can quickly turn into overvalued stock and stranded capital.

The illusion of safety in holding “a little extra” inventory hides real risk. Having more days on hand means increased exposure to cost fluctuations, aging, obsolescence, and financing costs. Less coverage, on the other hand, increases vulnerability to service disruptions if suppliers delay or costs spike unexpectedly.

The key is balance — knowing where risk is worth holding and where it isn’t.

Stable, predictable items can run lean.
High-volatility or long-lead items need measured buffers.
Low-value, erratic SKUs should carry minimal exposure.

The goal isn’t to eliminate inventory; it’s to manage it with the same discipline applied to financial risk.

Visibility and accountability

Visibility is the foundation of reasonable control. Teams that understand the true landed cost of their products, including tariffs, freight, insurance, and handling, are better positioned to make informed stocking and purchasing decisions.

Accountability complements visibility. Tracking supplier lead-time performance, delivery reliability, and responsiveness allows teams to align their inventory posture with supplier behavior. A supplier that consistently misses lead times deserves higher coverage. One that’s reliable does not.

The combination of cost visibility and supplier accountability allows teams to replace reactive decisions with structured, evidence-based adjustments.

From volatility to readiness

Managing cost volatility isn’t about outsmarting markets, it’s about designing resilience into daily operations. When inventory is treated as both exposure and control, it becomes a strategic buffer against uncertainty rather than a passive outcome of it.

Companies that manage inventory exposure well:

Protect margin even when input costs swing
Maintain service levels without incurring excess capital tied up in stock.
Make faster, more confident purchasing and pricing decisions.

Cost volatility isn’t optional — but exposure is. With disciplined inventory practices, volatility becomes something you manage, not something that manages you.

Check out our CEO Josh’s full presentation slides from the 2025 International Fastener Expo at the link here.

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How Distributors Are Turning 2025 Pricing Volatility Into a Competitive Edge

For distributors in 2025, pricing volatility has shifted from an occasional headache to an everyday reality.

What was once predictable has become a complex web of tariff impacts, inflation pressures, and shifting supplier behaviors that can change overnight. For distributors managing thousands of SKUs, this volatility creates decisions that can make or break quarterly performance.

The stakes are high. Get your pricing strategy wrong, and you risk damaging client relationships. React too slowly, and competitors gain ground. Move too aggressively on inventory, and cash flow suffers.

But the most successful distributors aren’t just surviving this volatility—they’re turning it into a competitive advantage. They have clear frameworks for when to adjust prices, how to communicate changes, and which suppliers offer unexpected flexibility.

In this article, we’ll examine the distinct response patterns emerging in the market and provide actionable strategies for protecting margins and client relationships.

Two Distinct Responses to Volatility Are Emerging

As we work with distributors across various industries, a clear pattern has emerged: companies are splitting into two distinct camps when facing pricing uncertainty.

The first group is betting on future price increases by stockpiling inventory now. They’re hedging against inflation by converting cash into physical goods before costs rise further.

The second group takes a more conservative position. They’re preserving cash, tightening operations, and preparing for potential demand slowdowns. With many distributors also anticipating slower economic growth or even recession, this cautious stance focuses on maintaining liquidity over inventory optimization.

Neither strategy is inherently right or wrong, but both carry significant risks. Aggressive inventory positioning can strain cash flow and warehouse capacity, while overly conservative strategies might leave companies scrambling when supply constraints hit.

The key is understanding how these tradeoffs—carrying costs, pricing trends, and margin exposure—interact specifically within your business model and market position.

Pricing Changes Require Strategy, Not Panic

When costs spike unexpectedly, the natural instinct is to raise prices immediately. However, hasty decisions can damage the client relationships, which took years to build.

The difference between B2B distribution and online retail is stark—while e-commerce companies can adjust prices daily based on market conditions, distributors operate in a relationship-driven world where sudden changes can trigger contract disputes and erode trust.

Smart distributors handle pricing adjustments with discipline:

Timing matters. Don’t wait until new inventory arrives at higher costs to announce increases. Plan ahead and communicate early when you have visibility into cost changes.
Communication is everything. A two-week lead time on pricing notices can preserve relationships. Clients appreciate transparency about market conditions driving the changes.
Use data, not emotions. Incorporate margin modeling, client segmentation, and historical data into decisions rather than reacting to daily headlines.

The most successful distributors have developed pricing playbooks with specific triggers for action, standardized communication templates, and clear escalation procedures for high-value accounts. This systematic method turns pricing volatility from a crisis into a manageable business process.

Flexibility in the Supply Chain May Surprise You

Despite headlines about tariff impacts and rigid supplier relationships, many distributors are discovering unexpected negotiating opportunities.

This contradicts the assumption that tariff-exposed suppliers would simply pass costs through without discussion.

A recent example from one of Hydrian’s clients illustrates this point. A major supplier—a publicly traded company—announced a 7% price increase, citing tariffs as the primary driver. However, Hydrian’s analysis of the supplier’s public financial disclosures revealed minimal actual tariff exposure.

When the client presented this information, the conversation shifted. The supplier acknowledged they had held prices for an extended period and that tariffs were simply the catalyst for a long-overdue adjustment. The 7% increase became 3%.

Suppliers facing genuine pressure often offer creative solutions:

Volume-based discounts to offset increased costs
Extended payment terms to ease cash flow pressure
Co-investment in freight or logistics improvements

The key is preparation. Research your suppliers’ actual exposure to cost pressures before accepting price increases at face value. Many suppliers are more willing to negotiate than they initially indicate, especially when presented with objective data about their true cost situation.

Best Practices for Navigating Volatility

While market uncertainty continues, the most successful distributors aren’t waiting for stability to return. They’re actively implementing systematic methods that turn pricing challenges into operational advantages.

What leading distributors are doing now:

Scenario planning with pricing inputs. Simple 12-month sales averages no longer provide reliable forecasting. When price changes can rapidly alter your market position, static methods become dangerous. Instead, implement responsive forecasting techniques that emphasize recent data and account for sudden market shifts.
Segmented client communications. Avoid one-size-fits-all messaging when announcing price changes. High-value, long-term clients deserve personalized explanations and advance notice, while transactional accounts may receive standardized communications.
Inventory flexibility with dynamic demand modeling. Run demand planning processes more frequently—weekly or bi-weekly instead of monthly or quarterly. When industries change rapidly, static planning cycles become obsolete.

Pricing volatility isn’t going away, but proactive planning creates resilience. The distributors thriving in this market aren’t the ones with perfect predictions—they’re the ones with adaptable frameworks.

If your business hasn’t updated its pricing protocols in the last 6-12 months, it’s time.

Best Practices for Navigating Volatility

The distributors thriving in 2025 have stopped treating pricing volatility as temporary and started building it into their operations.

Whether your strategy leans toward aggressive inventory positioning or conservative cash preservation, success depends on systematic methods. Companies struggling now are making reactive decisions—chasing price spikes, panicking over supplier notifications, or assuming conditions will normalize.

Volatility creates opportunities. Suppliers are more willing to negotiate than expected. Transparent communication can strengthen customer relationships. Market disruptions reveal inefficiencies that become competitive advantages once addressed.

Success requires combining data analysis, supplier intelligence, and responsive forecasting. It means moving beyond gut instinct toward systematic decision-making.

Check out the full video here!

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Inflation, Tariffs, and Supply Chains: Managing Price Increases

Featuring Josh Bartel

Guest-at-a-glance

Josh Bartel

Co-founder & CEO

Hydrian Inventory Optimization

Josh graduated from Stanford and previously co-founded Sanitopia.

Episode summary

In this video, Josh Bartel, Co-founder and CEO of Hydrian, discusses how to navigate the turbulent import tariff environment. He shares three key observations and strategies to help businesses adapt.

First, Josh notes significant price relief from suppliers due to tariffs. He advises importers to contact suppliers for potential discounts and domestic businesses to leverage existing inventory bought pre-tariff. Competition for these deals is high, so act quickly.

Second, Josh observes a shift towards domestic sourcing, though he cautions that increased demand affects pricing and lead times. A hybrid approach, maintaining some import sourcing, is recommended.

Finally, Josh addresses preparing for a potential economic downturn. He emphasizes responsive forecasting and inventory control, especially for long lead-time items. Prioritize inventory dollars over service levels for lower-volume products and actively manage open purchase orders to adapt to changing demand.

Key insights

Thoughtful Pricing in B2B is Crucial

Price changes in business-to-business relationships require careful consideration. Unlike online retailers who can adjust prices dynamically, B2B companies must prioritize long-term relationships. Sudden price hikes can damage trust and client retention. Transparency and open communication about price adjustments are key to maintaining strong partnerships. Sharing anticipated changes early on allows clients to adapt and strengthens collaboration. A measured approach to pricing fosters stability and demonstrates respect for established connections

Don’t Let Suppliers Exploit Tariff Situations

While some suppliers exhibit flexibility in mitigating tariff impacts through discounts, others use tariffs as a pretext for raising prices even without direct exposure. Businesses must be vigilant in scrutinizing price increases and requesting justification. Arming yourself with market information about actual tariff rates and competitor pricing empowers you to negotiate effectively. Don’t hesitate to push back against suspicious price hikes. Transparency and open communication are crucial in these negotiations.

Adapt to the “New Normal” of Volatility

The current economic landscape, marked by fluctuating tariffs, inflation, and supply chain disruptions, is not a temporary anomaly. Businesses should adapt their operations to this “new normal” rather than waiting for a return to previous stability. This includes developing flexible sourcing strategies, nurturing relationships with secondary suppliers, and adopting a more responsive forecasting approach. By acknowledging the ongoing nature of market volatility, businesses can proactively mitigate risks and maintain a competitive edge.

Avoid Speculative Inventory Purchases

The allure of buying large quantities of inventory when prices appear low can be tempting, but it’s a risky strategy. Commodity prices are inherently volatile, and attempting to time the market is often futile. Instead of speculating, focus on maintaining appropriate inventory levels to meet customer demand. A responsive forecasting model and close monitoring of sales and profitability are more effective than gambling on future price movements. Concentrate on core business strengths and leave market speculation to the financial professionals.

Episode Highlights

Flexibility and Negotiation with Suppliers

Timestamp: [00:00:46]

One surprising observation Josh shares is the flexibility shown by importers directly affected by tariffs. Many are willing to work with clients to mitigate the impact, offering discounts or sharing the burden. He advises businesses to actively engage with suppliers and explore potential cost-sharing arrangements. This proactive approach can lead to mutually beneficial outcomes and strengthen supplier relationships.

“Importers who are directly exposed to tariffs have shown a surprising amount of flexibility in working with our clients. An example might be they have a 25% tariff that applies to all the goods they sell, and they’re willing to give you a 10% discount.”

The Impact of Inflation on Inventory and Forecasting

Timestamp: [00:02:06]

Josh discusses the effect of inflation on pricing decisions. While inflation remained relatively low at the time of recording, the anticipation of rising inflation among businesses is influencing their behavior. This includes taking more aggressive inventory positions, anticipating higher prices, and bracing for potential economic slowdowns. This forward-looking perspective highlights the need for adaptable strategies and a proactive approach to managing potential risks.

“What’s important about that fact is that if they believe that’s the case, and they do, they’re going to respond by doing a few things. One is taking more aggressive inventory positions, buying more stock now before inflation happens.”

Maintaining Flexible Sourcing Strategies

Timestamp: [00:05:47]

Josh underscores the importance of flexible sourcing strategies. Having backup suppliers, even if they are not as price-competitive, can be invaluable during times of disruption. He advises businesses to not just identify these secondary sources but to actively cultivate relationships and maintain a baseline level of purchasing. This proactive approach ensures a readily available alternative in case of disruptions with primary suppliers.

“We recommend not only knowing who those companies are, but starting to have some level of buying with them. So, let’s say you import your product from overseas, you get really great pricing, maybe reserve 10% of your purchasing for a domestic source that’s not nearly as price-competitive, but you maintain that relationship.”

Supply Chain Disruptions and Scarcity

Timestamp: [00:03:35]

Josh discusses emerging supply chain disruptions, noting instances of empty shelves and product shortages. He draws parallels to the COVID-related shortages, although he anticipates a milder impact. He emphasizes that scarcity drives prices upward, impacting both acquisition costs and selling prices. Businesses need to be aware of these potential disruptions and factor them into their pricing and inventory strategies.

“One more thing I want to mention, too, is supply chain disruptions. We are starting to see, in June 2025, as we predicted a couple of months ago, some supply constraints. In other words, we’re seeing empty shelves among certain retailers, certain products.”

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Item Level Profitability: Strategies for Maximizing Product Performance

Master item-level profitability and maximize your product portfolio's potential

This focused eBook provides a practical framework for mastering item-level profitability, helping you identify star products, eliminate underperformers, and optimize your SKU mix for stronger margins. Discover how to implement the “SKU Diet,” balance holding costs and sales velocity, and make smarter decisions about pricing, stocking, and dropshipping. By leveraging detailed data and advanced analytics, you’ll transform your inventory from a source of hidden costs into a driver of sustainable profitability and growth.

Trusted by distributors and online retailers of all sizes

“Hydrian is not just a consultant, Hydrian is right there in the trenches with us every day. They are valuable partners.”

Mark Boussard

VP of Category Management

BBQGuys

Tariff Strategies: Price Breaks, Domestic Options, and Planning for a Downturn

Featuring Josh Bartel

Guest-at-a-glance

Josh Bartel

Co-founder & CEO

Hydrian Inventory Optimization

Josh graduated from Stanford and previously co-founded Sanitopia.

Episode summary

Josh Bartel, Co-founder and CEO of Hydrian, discusses how to navigate the turbulent import tariff environment. He shares three key observations and strategies to help businesses adapt.

Second, Josh observes a shift towards domestic sourcing, though he cautions that increased demand affects pricing and lead times. A hybrid approach, maintaining some import sourcing, is recommended.

Key insights

Price Relief Opportunities in a Tariff Environment

Many suppliers offer tariff-related price breaks. Importers should proactively seek discounts from their suppliers to mitigate cost increases. Domestic businesses can take advantage of pre-tariff inventory held by domestic suppliers, offering temporary cost savings. However, high competition for these deals requires swift action to secure favorable terms.

Balancing Domestic and Import Sourcing

The current environment sees businesses shifting from import to domestic products due to tariff-related price hikes. While domestic sourcing can be advantageous, consider increased demand, resulting in rising prices and longer lead times. A balanced, hybrid approach that retains some import sourcing is recommended to manage risk and maintain flexibility. Evaluate both domestic and import options carefully to find the most cost-effective and timely supply solutions.

Preparing for a Potential Economic Downturn

Recessionary concerns underscore the need for proactive inventory management. Regularly updated forecasts, responsive inventory controls, and dynamic forecasting models are critical. As demand fluctuates, inventory levels should adjust accordingly. Evaluate long lead-time items, balancing service level against inventory costs, and consider reducing inventory levels for low-volume items to free up resources. Actively managing open purchase orders provides another lever for quickly adjusting to shifts in demand.

Open PO Management for Adaptability

Purchase orders for long lead-time items represent significant commitments in uncertain times. Establish a clear workflow for modifying open purchase orders with suppliers. This includes knowing whom to contact and acceptable timelines for adjustments. Having these processes in place enables quick responses to changing demand, reducing risk and potentially avoiding excess inventory. Good reporting systems can highlight areas where PO adjustments may be necessary, providing an opportunity for proactive inventory management.

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A Comprehensive Guide to Inventory Optimization: Strategies to Overcome Stockouts, Long Lead Times, and Price Pressures

This comprehensive eBook delivers a tactical playbook for overcoming the most pressing inventory challenges—from stockouts and long lead times to supply chain disruptions and excess capital tied up in obsolete products. Learn how to implement smarter purchasing practices, optimize SKUs, and future-proof your supply chain through proactive planning and advanced analytics.

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How aerospace MROs can optimize purchase orders for better efficiency

Introduction

In the aerospace MRO sector, operational efficiency is paramount. Downtime is costly, and delays in maintenance or repair can have significant ripple effects. Further, the aerospace industry requires stricter quality control and compliance with government regulations. For example, aerospace MROs may need to ensure that parts come with documentation like airworthiness certificates, which can delay order fulfillment. Therefore, MROS need to take a strategic approach to purchase orders (POs).

However, PO optimization goes beyond simply placing orders; it’s a holistic approach that focuses on streamlining how these orders are created, processed, and managed. It is a crucial process for ensuring the correct parts and materials are available when needed to minimize downtime and keep aircraft in operation. The benefits of optimized purchase orders can be achieved without disrupting existing workflows, thereby enhancing collaboration and fostering positive relationships in the supply chain. Additionally, predictive optimization and inventory management techniques lead to significant cost savings for companies.

Outdated PO processes often lead to extended lead times, incorrect parts, costly stock mismatches, and ultimately, significant financial losses for MRO facilities. Therefore, the goal is to move away from reactive, error-prone purchasing towards a more strategic and optimized approach.

Through PO optimization, MRO facilities can reduce operational costs, minimize aircraft downtime, enhance overall efficiency, and strengthen supplier relationships. This guide explores key principles and practices to transform purchase order management and help you establish and maintain a competitive advantage within the aerospace MRO sector.

What is PO optimization?

In the aerospace MRO industry, PO optimization is a strategic approach to procurement, streamlining the entire order lifecycle to ensure that the right parts and materials are available, when needed, to keep aircraft in service.

Companies can achieve significant savings and optimize their operations through PO process optimization. This optimization can lead to substantial cost saving opportunities by improving procurement strategies. This involves focusing not just on what and how much to buy, but critically, on how to place those orders efficiently. The how is especially important in the highly regulated MRO environment where precise components, correct quantities, and on-time delivery are essential.

Fundamentally, PO optimization in aerospace MRO seeks to achieve several key objectives:

Reduced inventory costs: Minimizing excess stock while ensuring critical parts are readily available, reducing storage costs, and the risk of obsolescence. This is essential in aerospace, where parts can have high costs and specific storage needs.
Minimized lead times: Streamlining the order and delivery process to ensure parts arrive reliably and quickly. The goal is to reduce delays that can lead to aircraft downtime.
Improved service levels: Ensuring MRO facilities have the correct parts, at the right time and in the right quantities. This directly supports efficient aircraft maintenance and reduces operational disruptions.
Reduced labor costs: Implementing efficient processes to minimize time and effort for receiving, checking, and storing incoming orders. This includes streamlining the number of receipts and optimizing the handling of delivered items.
Enhanced supplier relationships: Creating stronger partnerships with suppliers through improved communication and data sharing, resulting in reliable order fulfillment.

Optimizing POs can drastically reduce the time it takes to close a purchase order. In typical scenarios, aerospace MRO facilities can experience an average of 100 days to close a single purchase order due to multiple partial deliveries. However, through PO optimization, this timeline can be significantly reduced, leading to a more efficient and predictable supply chain.

PO optimization is about creating a proactive, data-driven system that ensures the right parts are ordered, received, and used most efficiently.

The strategic importance of purchase order management

In aerospace MRO, PO management is about recognizing the profound impact that the ‘how’ of PO placement has on operational efficiency, cost reduction, and the overall flow of materials within a facility. The idea is to focus on ‘how’ those orders are created and fulfilled, while also addressing the potential risks such as errors, delays, and discrepancies that can arise from manual management.

The way POs are placed directly impacts the amount of waste in time and motion. Inefficient PO practices create a ripple effect of inefficiencies that can have significant consequences:

Reducing time waste: When POs are not optimized, it leads to a situation where large purchase orders are fulfilled with multiple partial deliveries. These fragmented deliveries cause time waste in many ways: receiving and processing each delivery separately, updating inventory records, and reconciling discrepancies. This directly affects the time it takes for personnel to manage the flow of materials into and out of the MRO facility.
Reducing motion waste: Inefficient PO management also results in motion waste. For example, staff may need to physically move through the warehouse to locate parts from multiple deliveries, increasing the chance of picking errors. Staff also waste motion by having to make multiple trips to and from the receiving area when orders are delivered in numerous partial shipments.

Large purchase orders can sometimes take around 10 unique receipts and up to 100 days to close. This happens when the focus is only on the ‘what’ and not on the ‘how’ of the PO. By optimizing the ‘how’ of PO placement, MRO facilities can eliminate many of these issues. By consolidating deliveries, matching POs with available inventory, and optimizing unit of measure, MRO facilities can streamline the flow of materials, reducing both time and motion waste.

Optimizing through vendor collaboration

In the aerospace MRO industry, optimizing POs requires a collaborative approach with vendors. Building strong, transparent partnerships and leveraging data sharing are critical for effective PO creation. These partnerships enable MRO facilities to move beyond transactional relationships toward a more strategic collaboration.

The significance of vendor collaboration lies in the ability to create a more responsive and reliable supply chain. This involves working closely with vendors to ensure:

Real-time visibility: Real-time data on vendor inventory levels allows MRO facilities to place orders that are aligned with what vendors have immediately available, reducing backorders and delays.
Accurate demand forecasting: Sharing demand forecasts with vendors helps them plan production and stock levels more effectively, ensuring that critical parts are available when needed, thus supporting efficient MRO operations.
Streamlined communication: Establishing clear and consistent communication channels with vendors enables quick resolution of issues and efficient handling of exceptions. This reduces errors and helps streamline the entire order process.

A critical aspect of vendor collaboration is creating purchase orders that align with a vendor’s actual stock and fulfillment capabilities. This alignment leads to significant improvements in logistics and order fulfillment processes. However, there is often no information about how the vendor is fulfilling.

By matching POs with actual vendor stock and capabilities, MRO facilities experience tangible improvements that include streamlined receiving, decreased labor costs, and reduced delays due to split shipments.

These strong partnerships enable a smoother flow of parts and materials, which is essential for maintaining aircraft and ensuring smooth MRO operations.

Leveraging data for smarter ordering

Moving beyond intuition and relying on data-driven decision-making can dramatically refine the PO process, especially when it comes to matching order quantities with vendor inventory. This strategic approach ensures that orders placed are not only accurate but also optimized for efficient fulfillment, achieving significant cost savings and operational efficiencies.

Accurate and timely data empowers MRO facilities to:

Align orders with actual stock: Real-time inventory data from vendors allows MRO facilities to align their orders with what is immediately available. This minimizes backorders and reduces the need for partial shipments.
Optimize unit of measure: By understanding how vendors fulfill orders (e.g., by case, tier, or pallet), MRO facilities can optimize the unit of measure they use in their POs. This means ordering in quantities that the vendor can fulfill efficiently, leading to faster and more complete deliveries.
Reduce receiving errors: With precise order quantities and optimized units of measure, the receiving process becomes more accurate. This reduces discrepancies, minimizes the time needed for checking in and putting away materials, and lowers the possibility of errors.

An aerospace MRO facility may believe they are ordering full pallet quantities, but, in reality, the vendor may not always have full pallets in stock. Without accurate data, the facility would continue to place POs for full pallets, resulting in mixed pallet deliveries that have to be broken down upon arrival.

However, with data on actual vendor stock and how they fulfill orders, the MRO can adjust their POs to order specific tiers or layers within the pallet, aligning directly with available inventory. This eliminates wasted labor breaking down pallets and optimizes the receiving process leading to labor savings and greater efficiency.

By leveraging data, aerospace MRO facilities can transform their PO process from a reactive, error-prone activity into a strategic advantage that directly impacts the bottom line and operational efficiency.

Conclusion

Purchase Order optimization represents a transformative approach for aerospace MRO facilities seeking to enhance operational efficiency and reduce costs. By focusing on the strategic ‘how’ of PO placement, facilities can move away from reactive, error-prone processes to a streamlined, data-driven supply chain, achieving significant improvements in query performance and storage cost reduction.

The transition to an optimized PO process requires a commitment to data-driven decision-making and collaboration with suppliers. It’s time for aerospace MRO leaders to assess their current PO processes and consider the strategic advantages of implementing these modern practices. Moving beyond the traditional, transactional purchasing methods to a more strategic approach is crucial for long-term growth.

Are you ready to discover how PO optimization can revolutionize your MRO facility? Take the first step towards transforming your supply chain and contact us to get a free inventory assessment today.

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Want to see how your inventory management stacks up?

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Inventory Management

Stock Optimization

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