Comment: Cross-channel gaps in inventory visibility reduces customer service
When speaking to a customer recently, a retailer said to me: if you cant share the visibility of inventory across channels (let alone actual inventory) then you cant do most cross-channel activities. By David Hogg
Our discussion focused on how that said retailer could maximize customer demand while controlling costs, reducing inventory while increasing revenue. Carrying inventory is expensive. The retailer had initiatives to increase inventory turnover, but those initiatives were becoming more complex with the rapid growth of other demand channels, most notably the Internet and the mobile channel.
These channels are creating new gaps in inventory visibility that affect the fulfillment execution process. What product is located where? Do channels share inventory? The answers depend on the retailer’s business model and the customer’s expectations, but in the end the retailer has to have the ability to satisfy their customers…efficiently and cost-effectively.
By overcoming the visibility gaps in fulfillment execution, all retailers can better serve their customer and deliver a superior experience. For example, improving in-store order and inventory visibility can close the visibility gap between the shelf and the backroom. In this way, if a customer attempts to purchase a promotional item, but the shelf is empty, the item may be located in the backroom.
In fact, a US article highlighted that the leading cause of shelf out-of-stocks was not lack of inventory, but that the merchandise was in the backroom and had not been replenished .
To add to the complexity, retailers are constantly adding channels. To a great extent, store inventory demands have dictated inventory allocation, but the growth of the internet as a demand channel has mandated change. Inventory can be located at many locations: on the shelf, in the backroom, or at the distribution center, carrier, distributor or supplier. The demand may come from numerous channels, thereby creating gaps in inventory available to meet demand by channel.
The retailer I mentioned earlier also highlighted that understanding inventory optimisation across channels can close the gaps in fulfillment processes that affect customer service, and is best accomplished through sophisticated order management capabilities. He said that key questions a retailer should consider include: how is inventory planned across all channels? Where is inventory located? How is it replenished? With a clear view of all on-hand, in-transit, on-order, and available-to-promise inventory, retailers can manage and sell inventory from a variety of sources - including inventory that they have yet to physically receive. By leveraging holistic inventory visibility and sourcing flexibility, the retailer can replace inventory with information…thereby reducing both reserve stock and stock-outs.
Consumers are placing greater service demands on retailers while expecting a seamless shopping experience. Effective inventory management is essential for meeting customer demands. Fortunately, retailers can achieve this goal by leveraging technology to access and utilise order, shipment and inventory information more effectively. If managing the entire order lifecycle and delivering a seamless customer experience are the goals, then establishing stronger inventory management capabilities by investing in flexible, cross-channel order management software will improve the customer experience while improving operational efficiency for any retailer.
David Hogg is retail and consumer packaged goods executive EMEA at Sterling Commerce
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