I oversee chemicals inventory. How do I navigate in these uncertain times?

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Finally, after almost two years, global supply chains are starting to work again. Chemical raw material orders are more promptly fulfilled. Inflationary pricing pressure on raw materials also seems to have calmed down: prices are beginning to decline. Thus it's only normal for chemical companies to indulge in overstocking some of the long-awaited materials, “just in case” for the future.However, the future still does not seem too bright. Recession is now a staple word in our day-to-day life, and the European Natural Gas crisis can have broader implications on raw materials availability.Thus, the conundrum: how to balance supply security vs. maintaining a more robust/ recession-proof cash position. Liberally stockpiling inventory cannot be the answer, otherwise the cash position of the company will drastically diminish.Before devising potential solutions (see next paragraph), it is necessary to assess raw materials based on risk score (in other words, likelihood of a raw material shortage based on numerous factors such as geography, length of supply chain) and potential financial impact (in other words, how much revenue and margin are at risk if a specific raw material is not present) (see figure).Based on the above, here are two implications for inventory:Buffering needs to be surgically prioritized, and it works well for low-spend items that have large revenue exposure. As a supply chain leader metaphorically explained it, “I cannot prepare a good meal if I don’t have a pinch of salt and other spices.” In the same way, a finished good cannot be finished unless it has all the materials present in the bill of materials. Hence, it is OK to overstock on small-spend items.Buffering on high-spend items is not feasible at scale and it is suboptimal. It is not feasible because the company will run out of money before having months-worth of inventory to ensure production despite raw materials shortage, and it is suboptimal because in times of economic uncertainty, cash is an even more important king than usual.So, what are the solutions to navigate these uncertain times?First, every company must focus on preserving cash, as this is the most fungible good to navigate uncertain times. Reducing inventory where it is not needed becomes necessary. Inventory stockpiling decisions need to be evaluated surgically. Demand projections need to take into consideration risk-adjusted scenarios, with the “soft landing” aimed by the Fed as the best-case scenario.Second, companies need to employ a broader set of levers to increase supply chain security. Levers need to address the specific risk that key raw materials are exposed to. Examples include: force supplier to diversify sourcing of its raw materials, qualify alternate grades, qualify second supplier in a non-high-risk region, reformulate products.A key enabler to the points above is obtaining visibility into the risks across the product portfolio by determining the revenue/margin exposure of each product line/BU (business unit) to risk-generating elements (for example, high-risk regions, sole-sourced materials). This involves linking a wide set of quantitative (for example, revenue exposure) and qualitative (for example, geographic/supplier/material risk evaluations) measures through the bill of materials of each product.This more scientific approach enables better conversations across the organization, allowing evaluation of the trade-offs between various risks (financial, supply chain security, production) as well as allowing more reactive margin management opportunities (for example, increase pricing for the very high-risk materials, as their future is more uncertain than other products).