How to Manage Inventory Distortion Effectively with the Cloud

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Posted Jun 7, 2017 9:00:00 AM by Greg Henry & filed under enterprise mobility solutions

According to the IHL Group’s research, inventory distortion costs retailers $1.1 billion globally. North American retailers lose $252.3 billion annually due to inventory distortion. The majority (56%) of inventory distortion comes from out-of-stock scenarios, while the rest result from overstocks.

Many of the retailer and customer demands for omnichannel and omnifulfillment technologies increase the opportunities and the complexity of inventory management. Customers buying online with same day at store pickup (BOPIS) expect to be able to do just that. If inventory levels aren’t accurate, providing shoppers with a BOPIS option may be a recipe for creating unhappy customers.

Fortunately, cloud based retail inventory management solutions offer a variety of solutions to handle a variety of inventory distortion challenges. Here are some of the most common inventory distortion obstacles and how a cloud-based inventory management solution can resolve them.

New products suffer over and understock problems in different locations

New product roll-outs, which are becoming more frequent as product life cycles shorten, lack direct purchasing data that can be analyzed to optimize inventory levels at different locations. But the mutual inventory visibility Marketing and Inventory Management can have through a cloud solution enables both teams to align and refine their efforts as real time data begins to flow in. 

Before the new product hits the stores, feedback from Marketing’s campaigns in different markets help to set a working baseline for inventory distribution. Once on the shelves, Marketing can shift its’ campaigns away from understocked locations towards locations that are heading towards an overstock situation or stock can be transferred from overstocked locations to understocked locations.

Spoilage makes inventory distortion messy

Spoilage is often associated with grocers and pharmacies, but fashion retailers suffer as well from changing fashion trends. In all cases, short product shelf life requires maximum effort to get them sold before they need to be discounted or thrown out. Every solution must seek to avoid spoilage since once it’s happened – the hit has already been taken. 

As perishables arrive at the distribution center, their clock is ticking. Cloud-based data management of current store inventor levels lets inventory managers adjust distribution accordingly. Cycle counts, POS data and Internet-connected sensors deliver the data whether a store is low on a specific item so associates can get perishable inventory out of storage and on the shelves. Vice versa, stores reporting high stock levels can have inbound inventory diverted to the understocked stores, so the overstocked store doesn’t compound its problem.

In the meantime, the cloud-based inventory management system gives Marketing visibility into the situation. Rules-based analysis that shows certain perishable items aren’t being sold at the rate needed to avoid spoilage can trigger promotions before resorting to significant price drops. This can include pushing out mobile promotions to people in the store, or the area. Digital shelf displays are another method to quickly invoke promotions.

Empty shelves turn into empty tills

The empty shelf is the classic understock nightmare. You’ve gotten someone into your store. They’re ready to buy. And then? Nothing. The product the customer wants either isn’t in stock, or is somewhere in the store where they can’t find it. Either way, you’re about to lose a sale. 

This understock scenario is one of the most dangerous for any store because shoppers have too many options to buy the same or similar products elsewhere – which is exactly where that shopper is going next.

In the "old days," customers would ask an associate to call another local store to see if they had the item in stock. With a cloud solution, associates can be far more proactive.

First, RFID tracking at the product level can help an associate find an item that’s not where it’s supposed to be. Using the RFID technology and shelf sensors, associates can also reduce the likelihood of the empty shelf in the first place by restocking misplaced items or shelves showing low stock.

If the item isn’t in the store, an associate can execute a purchase for the customer from the associate’s mobile device, and have the item delivered to them at home quickly from the closest distribution center. If the customer really does want it immediately, the associate can search the inventory at other local stores and execute the purchase for pick up so no momentum is lost.

How did the associate know the customer was looking for an item they couldn’t find? In-store beacons can send notifications to sales associates when a customer is spending a certain amount of time in an area with low stock. Additionally, in-store “help” buttons allow shoppers to quickly located store associates or mobile app’s used by the shopper can include a “Help” or "Sales Associate" call button to notify sales associates that a customer is looking for assistance, or even let sales associates push out a text message first asking if the shopper needs help.

Getting your vendors and suppliers involved

Some over or understock issues happen earlier in the supply chain. A vendor may be having supply challenges of its own, which will trickle down to your store. Using automated tracking technologies such as barcode and RFID in the supply chain minimizes the chances of routing mistakes. These technologies also enable logistics departments to monitor departure and/or arrival delays and make necessary adjustments. 

Cloud is all about insight and action

“Cloud” is a bit of a misnomer for an Internet-based inventory management solution, because one of its main benefits is removing the clouds that keep managers from knowing what’s happening with their inventory. On the contrary, using physical devices like RFID tags, in-store beacons, and sensors that connect back to an inventory management system via the Internet, means Marketing, Logistics, and store managers all gain unprecedented visibility into where their stock is, or is not. 

Setting up business analysis rules and notification triggers means the cloud-based inventory management system pro-actively monitors itself, so employees can focus most of their effort on resolving, rather than finding, inventory management issues. The earlier an under or overstock issue gets resolved, the more of that $252.3 billion in inventory distortion costs a retailer can hold onto and improve the bottom line.

Let DecisionPoint Systems help you take control of your inventory. Contact us today for a free consultation.

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