Magazine Article | September 23, 2012

In-Stock By Popular Demand

Source: Innovative Retail Technologies
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October 2012 Integrated Solutions For Retailers

By Matt Pillar, editor in chief

The closer you can align the mechanics of your replenishment effort with channel-specific points of demand, the fewer stock-outs you’ll suffer.

The battle for in-stock consistency is as old as retail itself. In the brick-and-mortar world, expensive safety stock was once the path of least resistance to out-of-stock avoidance. Then, just as demand-driven replenishment models began to hit their stride, the game forever changed. Now, as inventory management systems evolve to accommodate the multitouch point, omnichannel consumer mentality, the challenge of managing sales and inventory visibility to maintain a positive in-stock position becomes even greater. Here, we discuss the renewed importance on inventory visibility and omni-channel in-stock positioning with RedPrairie VP of product strategy Tom Kozenski.

Recent research from the Grocery Manufacturer’s Association found that shoppers have only a 52% chance of fulfilling a ten-item shopping list without encountering a stock-out. Why such a poor percentage?

Kozenski: The most common cause of out-of-stocks is the challenge retailers face in understanding consumer demand and the time it takes to get replenishment stock to the store. Retailers have tried different types of demand replenishment models for years with varied success.

What inventory replenishment methods and technologies can help retailers improve this figure?

Kozenski: An optimal method for retailers to satisfy customer demand without buying millions of dollars of excess inventory is forecasting inventory at the point of demand — which is at the store. Forecasting in real time at the store level and collecting data from the point of sale is how retailers can achieve the most accurate picture of demand. Having a true understanding of what a retailer plans to sell based on what it is actually selling, and having that data feed the replenishment systems so retailers can share order data and collaborate with their suppliers, is the most effective method of reducing out-of-stocks and ensuring customer satisfaction.

Another valuable tool to help retailers ensure they have the right inventory on hand is through storelevel perpetual inventory. Perpetual inventory tracks inventory at the store in near real time by tracking sales through POS integration, monitoring shrink, accounting for expired inventory, etc.

When store-level planning systems and perpetualinventory systems are integrated, retailers have created a powerful solution to right-size inventory levels and satisfy customer demand.

What is the impact of cross-/omni-channel retailing on replenishment initiatives — especially in light of the trend toward fulfillment from a single inventory repository?

Kozenski: The increase in all-channel retailing is putting additional pressure on retailers to understand where inventory is positioned throughout their extended supply network. To achieve an optimal “buy anywhere, fulfill anywhere” model, fulfillment decisions need to be made based on a single view of enterprisewide inventory. For example, when an order comes in, a retailer will need to know if those items should be fulfilled from a warehouse or a store, dropshipped to the store for customer pickup, fulfilled through a third party logistics provider, or perhaps a combination of various fulfillment options based on that particular order.

Once a retailer is able to achieve “buy anywhere, fulfill anywhere,” it is better positioned to preserve margins and create happier customers.

Discuss the future of automated forecasting and replenishment systems for retailers. What will drive improvement over the next 5 to 10 years?

Kozenski: Advances in automated forecasting and replenishment systems will enable retailers to manage their inventory more holistically. Additionally, replenishment systems will continue to have tighter integration with workforce management solutions to ensure retailers have an enterprisewide view of both inventory and labor forecasts — an essential component of all-channel retailing.

The all-channel business model will also continue to impact how labor and inventory are tracked and allocated. As in-store fulfillment for Internet orders increases, it will add new considerations relative to labor, inventory, merchandising, and parcel shipping costs.