Scare Away the Ghost Economy with a Smart Inventory Strategy
IHL Group estimates that over $1.75 trillion in revenue is lost annually worldwide, stemming from the combined total cost of overstocks, out-of-stocks and sales returns. These revenue gaps make up the Ghost Economy. When better math and science are leveraged to accurately predict demand, the losses from out-of-stocks and overstocks can be mitigated.
A retailer’s inventory ties up working capital. Representing the largest liquid asset, it is a vital investment that shouldn't haunt the bottom line or loom over the quarterly forecast. This investment should instead become a strategic differentiator that drives revenue.
Effectively managing inventory in the world of omnichannel retail is challenging. Retailers must make investments as productive as possible, maintain visibility into inventory levels across their entire network and manage multiple, often conflicting promotional schedules. Achieving the right balance of "not enough" and "too much" can be daunting, but the guesswork comes out of a retail inventory strategy when better math and science are leveraged to elevate the traditional forecasting methodology.
Retailers seeking to give up the ghost economy can leverage best in class analytic tools that generate and maintain forecasts at different levels of product and location nodes. The next generation inventory planning requires the adoption of a multi-echelon approach to attain actionable insight into the necessary balance of supply and demand to improve predictions and boost profitability.