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Perspectives

Using Placement, Omnichannels and "Ubiquitous Supply" to Manage Inventory

2014-08-12


Retailers and manufacturers can reconcile age-old inventory challenges by rethinking inventory policies and placement, reinventing inventory channels, and rewiring their inventory software.

Retailers and manufacturers can reconcile age-old inventory challenges by rethinking inventory policies and placement, reinventing inventory channels, and rewiring their inventory software.


Because items sitting on a shelf represent unsold product, retailers and manufacturers have experimented with inventory since the dawn of commerce. The goal is to hold just enough to satisfy demand.

But demand spikes at any given moment. And today's sellers deal with even greater challenges, including a global marketplace, two–day (if not same day) shipping, social shopping, online reviews and price matching.

Fortunately, technology can also counteract the above challenges. For example, global inventory, advanced planning, business process change and vendor-managed or "drop shipping" inventory all help companies like the top–25 supply chainers balance modern inventory in their favor.

Here's how you can do the same

Rethink Policy, Reinvent Channels, Rewire Software

To anticipate modern demand, world–class retailers and manufacturers view and track inventory from a single dashboard. This requires three things:

1. Ingesting social, web and mobile demand data into a single repository.

2. Analyzing said data to proactively alert supply stakeholders of changes in demand.

3. Making tactical inventory decisions based on those alerts.

 

Figure 1

The challenge is harnessing unstructured data and connecting it to global inventory systems to enable more timely and accurate forecasting. Linking point–of–sale systems to the back–end is one way to accomplish this. Employing omnichannel inventory systems or inventory analytics is another. Whatever the end solution, we encourage manufacturers and retailers to rethink inventory policies and placement, reinvent inventory channels and rewire their inventory software.

  • RETHINK: Although not every supply chain moves at the speed of Amazon, all retailers are feeling the effects of the giant e–tailer's turbo–charged ways. To cope, retailers and distributors are increasingly choosing to have vendors or manufacturers hold inventory for them and fulfill customer orders directly. This, along with an increase of regional warehouses, helps sellers reduce geo–latency concerns and refill inventory more quickly.

  • REINVENT: Traditionally, inventory management consisted of hedging peaks and valleys in supply and demand. Today, the goal is to create the appearance of "ubiquitous inventory" or the impression of an unlimited supply at every fulfillment point. For example, a lost sale can be avoided with an omnichannel approach to inventory, including the ability to order an online item from within a store, redirect the customer to a nearby store with the item in stock, or ship an out–of–stock item from "store to home". We recently helped a large national grocer do the latter for a positive result.

  • REWIRE: For retailers, the foundation of rewiring inventory systems begins and ends with connecting point–of–sale systems to order fulfillment ones. Doing so enhances decision–making. For example, this linkage enables a swimwear retailer to shift stock from stores in northern climates to southern outposts, depending on the weather. For manufacturers, this could mean tracking customer SKU inquiries online to better anticipate demand, something we advised a large client to do recently, which resulted in a 20% increase in revenue.

Starting With the Right Questions

When considering how your organization should overhaul its inventory, use these questions as a starting point:

  • How should we adapt our planning policies (such as service, stocking and placement) and processes (such as movement of inventory from supply to customer)?

  • What new or enhanced capabilities are required in order to meet those changes? (Such capabilities might include social/mobile integration with planning to capture refined demand signals at the local level.)

  • What are the catalysts required (in terms of people, process and technology) to drive adaptive inventory planning? (Examples include new or retrained employees who can integrate social/mobile/analytics into planning processes; implementation of inventory planning software; and new analytics processes that aggregate and extract trends from social/mobile data.)

  • How can we create a seemingly ubiquitous supply to meet the increasing demands of today's buyers?

  • What changes, if any, are required in our infrastructure, IT and otherwise? (For example, a company might need to create the capability to receive demand data from customers/retailers that aligns with consumer demand data from other sources. A company might also need to reorganize its distribution network to better accommodate shorter replenishment times for restocking local retailers.)

  • What is the best approach to accelerate the rethinking, reinventing and rewiring of inventory planning? (Hiring external experts may help speed the realization of expected benefits when internal staff is busy with day–to–day job responsibilities.)

In the end, the journey to create an adaptive "value chain" comes down to creating new channels for growth, deeper penetration of existing markets and different positioning of the brand and its processes. Understandably, inventory management is a key component of this exercise.

For more information, read the full white paper, Inventory Management: How Incremental Improvements Drive Big Gains or visit Cognizant's manufacturing practice.

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Using Placement, Omnichannels, and "Ubiquitous Supply" to Manage Inventory