Inventory has been a major challenge for retailers of fast-moving consumer goods.
This is because the goods sitting on a store shelf or in a warehouse literally represents unrealised sales; as a result retailers are seeking ways to fine-tune their inventory practices.
The goal of most business owners is to have enough inventories to satisfy the demand of the consumers.
However, experts note that inventory tactics have changed due to the fast pace of commerce, its global reach and heightened consumer expectations driven by social shopping, online review sites and comparison pricing on the Internet.
A report by Cognizant, states that there is little doubt that supply chain velocity has steadily increased in recent years, in terms of how fast goods move from production to consumption.
The report titled, ‘Inventory management: How incremental improvements drive big gains,’ says that these forces are bombarding retailers and their suppliers but technology is coming to their aid by helping them adapt to the new marketplace dynamics.
To cope with the challenges, the report suggests strategies and restructuring that will improve supply and inventory of manufactured products.
New technologies improve inventory planning processes
According to Cognizant, the question of how to manage inventory — what and how much to stock, where to place it and where to assemble or manufacture it — has never been more crucial.
It observes that stocking the wrong product is another chronic issue that can contribute to manufacturers failing to meet service levels with customers and partners, with consequences that are arguably graver for the retailer.
It adds that inventory management grows even more pressing in times of economic stress because virtually every company needs to gain better leverage from its working capital by improving inventory turns, in order to grow revenues, hold down costs and increase productivity.
The report says that the adoption of technologies such as global inventory management systems and advanced planning solutions — supported by business process change, where needed — are helping to grease the wheels of commerce and, therefore, the movement of inventory.
“The good news is that emerging collaborative global inventory management systems are enabling manufacturers and retailers to attain full visibility into their global inventory. Used in many cases with inventory planning tools, global inventory management systems interact with ERP to provide a near-real-time, end-to-end picture of inventory, wherever it resides,” the report explains.
Rethink inventory management strategies
Cognizant observes that for both manufacturers and retailers, inventory stakes have grown exponentially, along with customer expectations, especially on the consumer side.
Although not every supply chain moves at the speed of Amazon, all retailers are feeling the effects of the giant retailer because Amazon currently ships more of its orders via its two-day offering than its free super-saver shipping today, it adds.
It notes that consumers can no longer tolerate a one-minute wait in line for an ATM, and they cannot wait to return purchases via the channel they purchased them.
It adds, “Any retailer or other customer-facing company that get this wrong, risks an army of dis-satisfied customers taking to social sites to express their views — loudly and with effortless reach.
“Customers are not going to give you more time to get the right products to the channel in which they want to purchase them. So the pressure is on the supply chain, buttressed by advanced planning and inventory management capabilities, to pick up the slack while at the same time managing customer expectations.”
To cope with the challenges, the report suggests that the company’s inventory management strategy should be revisited often.
“Retailers and distributors are increasingly choosing to have vendors or manufacturers hold inventory for them and fulfill customer orders directly. These choices should flow directly from the company’s inventory management strategy, which should be set at high executive levels and revisited often,” it says.
Reinvent inventory management operations
According to the report, traditional inventory management involves managing the highs and lows in supply and demand but the today; the picture is much more complex.
It notes that the ultimate goal is to create the appearance of ever-present inventory, or the impression that an unlimited supply of unlimited products is available.
It says, “Traditionally, if a customer walked into a store and did not find the item on the shelf, it meant lost sales for the retailer/manufacturer and dissatisfaction for the customer. With multi-channel commerce in the picture, this is no longer true. Today, an in-store kiosk can allow consumers to place an order for items unavailable in the store, thereby avoiding a lost sale.
“Alternatively, a quick look-up in the POS system can redirect the customer to another store in the area that has the item. Even better is the “shop-to-home” option, in which the item is dispatched quickly from a nearby distribution centre.
Rewire inventory management systems
The report states that for retailers, the foundation of rewiring inventory management systems is to connect point of sales systems to back-end planning and order management systems.
According to the report, this linkage enhances decision-making, as inventory choices are based on actual data rather than nebulous forecasts.
The report suggests that data from online forums and communities can be used to drive assortment and inventory planning in retail.
“For example, an online community of health-conscious people might talk about their experiences with the latest model of a popular sneaker. The retailer and manufacturer can mine that data for ideas on everything from inventory placement, to customer support, to research and development,” it says.
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