Retailers are constantly attempting to determine the "right" mix of products — one that won't leave them empty handed, yet not linger too long on the shelves.
Predicting what may be sold and when too often results in retailers getting stuck with the high costs of inventory and storage.
Other times, retailers fail to recognize trends and fads, and therefore miss out on sales because stock has been depleted.
Analysis of retailers' POS data can offer insight regarding customer preferences, and tech savvy retailers crunch those numbers to make an inventory "best guess."
The challenge lies in determining how to effectively manage inventory levels without sacrificing customer availability.
Online channels and stores working together
One increasingly popular method is to use brick and mortar stores as the fulfillment centers for the e-commerce channel.
The shopping mecca for do-it-yourselfers, Home Depot, has embarked on a new strategy that aims to avoid the overstock/understock conundrum.
As part of "Project Sync," Home Depot has created a steadier flow of more supplier deliveries with fewer trucks into its network of 18 sorting centers.
So, a center might request three trucks deliver five times weekly, rather than twice weekly deliveries from seven suppliers.
Spreading out deliveries might increase logistics costs, but that's still more cost-efficient than taking up shelf space for long periods of time.
In addition, real-time inventory systems like Retail Pro Prism help with incremental product adjustments during the week.
Home Depot competitor Lowes also acknowledged the need to improve conversion and gross margin while better managing inventory via technology, in a recent earnings call.
"We'll better empower associates by deploying more user-friendly interfaces," said Richard D. Maltsbarger, chief operating officer. "Later in the year, we'll significantly improve our associate connectivity, expanding the functionality of our in-store handheld devices to improve the efficiency of our order staging and management, daily tasking, and inventory processes.
This year, Lowes plans to spend 55% more on capital expenditures than the $1.1 billion it spent in 2017.
A new direct fulfillment center is in the offing, to accommodate the expansion of the home improvement giant's online product offering and to provide faster order processing.
It will also improve Lowes' buy online, pickup in store (BOPIS) experience.
Tech is key to better inventory management
Implementing IT solutions that identify customer trends and buying behaviors helps retailers identify which products will resonate, and which will not.
Today's largest retailers are using strategies that evoke just-in-time strategies used by manufacturers: Product is pulled in as-needed, and inventory levels are extremely low, perhaps only a few days of stock is on hand.
Moving goods more quickly, efficiently and accurately creates happy customers, which provides shelf space for more products that, in turn, creates more happy customers.
|You Might Also Like:|