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.

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Want to see how your inventory management stacks up?

We’re so confident in our results, we offer a free performance assessment to all prospective clients. This isn’t a canned sales deck – it’s a bespoke presentation that takes 10-20 hours of our time. Whether we work together or not, we promise you’ll walk away with useful insights that will improve your business.

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.

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Want to see how your inventory management stacks up?

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!

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Want to see how your inventory management stacks up?

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.”

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Want to see how your inventory management stacks up?

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.

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Want to see how your inventory management stacks up?

Maximizing efficiency through PO optimization

Featuring Josh Bartel and Drew Roth

Guest-at-a-glance

Josh Bartel

CEO

Hydrian Inventory Optimization

Josh graduated from Stanford and previously co-founded Sanitopia.

Drew Roth

Director of Product Engineering

Hydrian Inventory Optimization

Experienced software engineer focused on inventory optimization.

Episode summary

In this episode, Josh Bartel and Drew Roth discuss PO (Purchase Order) optimization, a crucial component of inventory optimization services. They explain how PO optimization focuses on improving the “how” of placing purchase orders, aiming to minimize inventory while maintaining high customer service levels and reducing labor costs.

Josh and Drew highlight common issues in traditional PO processes, such as long closure times and multiple receipts per order. They introduce key principles of PO optimization, including building orders unique to each fulfillment facility and matching quantities to vendor stock levels. The duo emphasizes the benefits of this approach, including reduced lead times, fewer errors, and labor savings through improved unit of measure rounding.

The conversation also covers the advantages for suppliers, the data requirements for implementing PO optimization, and the significant improvements seen in clients’ operations. Josh and Drew share examples of how this process can lead to more efficient truck loading and drastically increase the percentage of order value arriving in the first receipt. They conclude by noting that PO optimization is part of Hydrian’s broader service offering, aimed at enhancing coordination between clients and their vendors.

Key insights

Understanding PO Optimization

Understanding PO optimization means making sure we use less inventory and spend less on labor while still making customers happy. It’s all about getting better at how we order things from our suppliers.

Factors in Purchase Order Creation

Factors influencing PO creation include tailoring each order to suit specific ordering and fulfilling facility lanes. By customizing POs in this manner, companies can optimize logistics, minimize errors, and ensure smoother operations throughout the supply chain. Additionally, verifying that ordered quantities align with vendor stock levels is crucial to prevent fulfillment complications, such as backorders or delays.

Vendor Benefits and Collaboration

Optimized PO has advantages for both clients and suppliers. By enhancing the efficiency of order fulfillment, vendors may experience significant cost savings and operational streamlining. Importantly, these benefits can be achieved without disruption to existing workflows, fostering a positive collaborative environment between parties. Overall, optimizing purchase orders fosters mutual gains and strengthens relationships within the supply chain ecosystem.

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Want to see how your inventory management stacks up?

Product sourcing challenges in the automotive industry

Featuring Josh Bartel and Drew Roth

Guest-at-a-glance

Josh Bartel

CEO

Hydrian Inventory Optimization

Josh graduated from Stanford and previously co-founded Sanitopia.

Drew Roth

Director of Product Engineering

Hydrian Inventory Optimization

Experienced software engineer focused on inventory optimization.

Episode summary

In this video, Josh Bartel and Drew Roth discuss product sourcing in the automotive industry. Josh and Drew explore the challenges faced by distributors, wholesalers, and online retailers when dealing with multiple sources for each product.

The conversation covers key considerations for selecting the most suitable source, including drop-shipping capabilities, cost and margin analysis, and lead times. They emphasize the importance of balancing profitability with maintaining stock availability to retain customer trust. Josh and Drew also discuss the concept of “gap buying” — making smaller domestic purchases to bridge inventory gaps while waiting for larger, more cost-effective overseas shipments.

The duo highlights the significance of understanding stock-out costs and maintaining good relationships with multiple vendors. They stress the value of diversifying supplier relationships, even with competitors or smaller partners, to ensure business continuity and flexibility in sourcing. Josh and Drew conclude by addressing the complexities of dealing with “gray market” products and the benefits of having access to vendor inventory data for making informed sourcing decisions.

Key insights

Understanding Product Sourcing Dynamics

The podcast delves into the complexities of product sourcing, particularly within the automotive and automotive aftermarket industries. It highlights the challenge of selecting the best source for each product, considering factors beyond just profitability.

Considerations for Selecting Sources

Drew outlines three primary considerations for selecting sources: drop shipping feasibility, cost analysis including margins, and lead time assessment, with a focus on domestic suppliers’ quicker turnarounds compared to potentially cheaper but slower overseas options.

Importance of Vendor Relationships

They emphasize the importance of maintaining good relationships with vendors, even with secondary or smaller-scale suppliers. These relationships can prove crucial during stock shortages or if primary suppliers become unavailable.

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Want to see how your inventory management stacks up?

AutoZone’s supply chain expansion: A case study

Featuring Josh Bartel and Drew Roth

Guest-at-a-glance

Josh Bartel

CEO

Hydrian Inventory Optimization

Josh graduated from Stanford and previously co-founded Sanitopia.

Drew Roth

Director of Product Engineering

Hydrian Inventory Optimization

Experienced software engineer focused on inventory optimization.

Episode summary

Drew Roth sits down with Josh Bartel to discuss the challenges and opportunities of supply chain expansion. Using AutoZone’s ambitious plan to build 200 new distribution centers as a case study, Josh explores the potential benefits and downsides of multi-echelon networks.

While expanding a company’s geographic footprint can lead to faster delivery and increased sales, Josh cautions listeners about hidden costs. Internal freight costs, outbound shipping expenses, and the complexity of managing inventory across multiple locations can cut into any potential gains.

Josh emphasizes the importance of focusing on local fill rates as a key performance indicator. He advises companies to prioritize optimizing inventory at existing facilities before expanding their network. This episode offers practical advice for any business leader looking to improve their supply chain strategy.

Key insights

Don’t confuse network fill rate with success

While expanding your distribution center network might look good on paper — increasing your overall in-stock rate — it can mask inefficiencies. Josh cautions against focusing solely on network-wide fill rates. He stresses the importance of local fill rates, meaning the percentage of orders fulfilled from the DC closest to the customer. A high network fill rate alongside a low local fill rate often indicates an imbalance requiring attention.

Hidden costs can undermine expansion benefits

Before embarking on an ambitious DC expansion project, businesses need to fully grasp the potential hidden costs. Josh highlights internal freight expenses as a common culprit. Moving inventory between DCs to fulfill orders adds up quickly and often goes unnoticed as it’s grouped with general transportation costs. Additionally, increased inventory carrying costs and the added complexity of managing a larger network can significantly impact the bottom line.

Prioritize inventory optimization before expansion

Josh advises companies to exhaust inventory optimization strategies at existing facilities before investing in new distribution centers. Often, companies can achieve significant improvements in delivery speed and customer satisfaction by simply improving inventory management practices at their current locations. This might involve implementing demand forecasting tools, optimizing safety stock levels, and streamlining warehouse operations for greater efficiency.

Test new markets with 3PLs before full expansion

For companies considering expanding their geographic reach, Josh recommends a cautious approach. Instead of immediately investing in new facilities, he suggests partnering with a third-party logistics provider (3PL). This allows companies to test demand and gauge the market’s response to faster delivery times in a new region without the significant upfront costs associated with building or leasing a DC.

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Want to see how your inventory management stacks up?

Optimize your offering: Item level net profitability

Featuring Josh Bartel and Drew Roth

Guest-at-a-glance

Josh Bartel

CEO

Hydrian Inventory Optimization

Josh graduated from Stanford and previously co-founded Sanitopia.

Drew Roth

Director of Product Engineering

Hydrian Inventory Optimization

Experienced software engineer focused on inventory optimization.

Episode summary

Josh Bartel and Drew Roth tackle the crucial question: which items should distributors and wholesalers carry? They explore the pros and cons of common inventory strategies including stocking, just-in-time ordering, dropshipping, and removing items from your catalog entirely.

Drew emphasizes the need to analyze factors beyond gross margin when determining true item profitability. Minimum order quantities, vendor performance, shipping costs, and even customer order composition can significantly impact an item’s financial viability.

Discover how one client achieved impressive results by embracing a “SKU diet.” By strategically reducing their product catalog by 40% based on Hydrian’s data-driven analysis, they unlocked revenue growth and increased overall profitability. This episode offers valuable insights and advice for anyone interested in optimizing their inventory.

Episode summary

Key insights

The "SKU diet": Less can be more

Distributors and wholesalers often feel pressure to offer vast product catalogs. However, carrying too many SKUs can negatively impact profitability and customer experience. Josh and Drew advocate for a “SKU diet” – strategically reducing your catalog by eliminating underperforming or unprofitable items. This simplifies operations, reduces inventory costs, and can even lead to sales growth by improving customer focus.

True profitability: Beyond gross margin

Don’t be seduced by a product’s seemingly attractive gross profit margin. Drew emphasizes the importance of considering all costs associated with an item, including inbound freight, storage, outbound shipping, and potential obsolescence. By calculating the true net profitability, businesses can make more informed stocking decisions.

Vendor performance: A key factor in dropshipping

Dropshipping can be an attractive alternative to stocking inventory, but vendor reliability is paramount. Drew and Josh advise carefully evaluating potential dropship partners on factors like shipping speed, packaging quality, and inventory accuracy. Inconsistent vendor performance can damage customer relationships and negatively impact your brand.

Data-driven decisions: The key to inventory optimization

Making sound inventory decisions requires more than intuition. Josh highlights the power of data analysis in identifying underperforming SKUs, optimizing inventory levels, and ultimately improving profitability. By leveraging tools and insights, businesses can move away from gut feelings and towards objective, data-supported inventory strategies.

Want to learn more? Check out this blog post.

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

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Want to see how your inventory management stacks up?

We’re so confident in our results, we offer a free performance assessment to all prospective clients. This isn’t a canned sales deck – it’s a bespoke presentation that takes 20 hours of our time. Whether we work together or not, we promise you’ll walk away with useful insights that will improve your business.

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Want to see how your inventory management stacks up?

Higher demand and longer leadtimes: The COVID “double whammy”

Presented at International Fastener Expo 2021

In early 2020 as COVID swept across the globe, supply chains began to reel as the consequences of the pandemic forced actions such as factory shutdowns and workforce shortages. The resulting leadtime increase led to a jump in order quantities to account for the extended time between receipt of shipments, but between March and May of 2020 there was a massive plummet in demand. All of a sudden businesses had more inventory than they had had in the recent past and half the demand, leading to a tremendous jump in ‘Days on Hand’.

Fortunately, this March to May stretch did not last and demand recovered quickly and continues to climb. The only issue is leadtimes have not recovered like demand, in fact, they have continued to decline. This has led to the opposite problem experienced in March through May as businesses now have declining ‘Days on Hand’ caused by rising demand and inability to get items on the shelf.

The above is obviously applying a broad brush to the current set of issues created by COVID, but is representative of the “general” inventory issues present for most businesses. Using some anonymized client data from Hydrian, it is possible to see how these effects have played out with a real business and lends itself to a discussion on how to mitigate the effects of the current state.

Pulled from actual client data, we can see in the graphic below that since September of 2020, lead times have not only risen but the spread between the median lead time and 75th percentile of leadtime has widened. This means that it takes longer to get what you ordered from your supplier AND the actual count of days you will receive it in is less predictable, culminating in increased inventory values.

In the chart below, it is clear to see how leadtimes have affected inventory investment. Inventory on order has risen to account for increased demand (shown by the red line), longer leadtimes, and less predictable lead times. However, we also see inventory on hand declining which tells us that receipt of shipments cannot keep up with demand due to these leadtime delays.

With unprecedented ‘inventory on order’ levels, the potential for an “ocean” of excess stock is a real concern if supply chain challenges suddenly resolve themselves. However, what we know about COVID is its impacts are hard to predict, so being prepared to be nimble regardless of circumstances is the new requirement. Below are some strategies to minimize stockouts in the face of huge demand and supply uncertainty and ensure that when lead times do recover and customer demand returns to normal, inventory doesn’t balloon in value due to a bullwhip effect.

1. Develop highly responsive inventory controls (e.g. min/max) and buying strategy

As lead times or demand grow, get more inventory “into the pipeline”
Conversely, be ready to reverse changes if demand falls or suppliers improve

2. Work with suppliers to adjust PO qtys, push / pull deliveries, and cancel if needed

Establish guidelines for “finalization” dates of PO qty, release date, etc
Share sales forecasts with suppliers (and ensure they utilize them)

3. Recognize unavoidable excess before it hits your shelf

If quantities can’t be changed / cancelled, start liquidating excess before it arrives
Consider price reduction, added marketing spend, or other promotion
When it makes sense, divert incoming POs to other facilities

4. Track appropriate metrics for measuring supplier and internal performance

Track both median / average as well as the distribution of lead times
Inventory turns / days on hand, in-stock rates, delivery speed, etc

A link to the full presentation can be found here.

Subscribe to our newsletter

Get updates on the latest news across all core inventory-related processes.

Subscribe now!

Your email is safe with us, we dont spam.

Library

Demand Planning

Distribution

E-commerce

Inventory Management

Stock Optimization

Supply Chain

Video

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

Summary

Main article

Reliability: The foundation of every partnership

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

Visibility: The blind spot beyond Tier 1

Diversification: The illusion of independence

Re-shoring: Promise and pragmatism

How leading firms are responding

The broader lesson — supply chain resilience begins upstream

You might also like