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The Retail Inventory Imperative: Using Inventory Intelligently

By John Konczal,
The Retail Inventory Imperative: Using Inventory Intelligently

Inventory is one of the fundamental building blocks of the omnichannel retail world. Like any of the six main elements that form the building blocks of human life - sulfur, phosphorous, oxygen, nitrogen, carbon and hydrogen – if inventory becomes degraded, then the life of an omnichannel retailer begins to fail. Retail executives recognize the risks of degraded inventory accuracy. HRC Retail Advisory found that 66 percent of retail executives surveyed believe that inventory inaccuracies make their buy online, pick up in store (BOPIS) service offerings inconsistent.

In our last article post on the retail inventory imperative, we discussed the need for retailers to present a highly accurate view of available inventory during any customer sales transaction through any channel. Without this clear visibility into inventory availability, the omnichannel experience can begin to degrade, as customers are promised something – like the availability of an item for same-day pickup at the local store – and the promise can’t be kept.

Business capabilities, like an order management system with global inventory visibility, can go a long way in helping retailers achieve this clear visibility through any channel, during any sales transaction. Add in constrained views of inventory that complement global inventory, and visibility into availability gets even better. Constrained views allow retailers to define and configure what inventory is available to commerce for sale to customers. For example, defining if a local retail store can operationally handle same-day pickup when inventory is available at the store.

Defining and presenting what inventory is truly available to commerce is critical to sustaining life as an omnichannel retailer. However, retailers want to do more than sustain. They want to get healthier. Healthier by improving customer loyalty and lifetime value, and by improving the profitability of omnichannel operations. Getting healthier means going beyond global inventory visibility.

The use of available inventory can be optimized to help retailers boost customer satisfaction and omnichannel profitability. A retailer’s order management system should be able to go beyond understanding inventory availability to determining the most beneficial way to use available inventory for both the customer and the retailer.

Let’s consider a typical business scenario. A customer orders a large blue sweater for next-day delivery. The local store has availability and the ability to meet the customer request. The order management system selects this store for fulfillment based on inventory supply, geographic proximity and shipping and handling costs.

However, there is a better option to fulfill the customer order – one that keeps the customer promise but helps the retailer improve profitability. While the local store (store A) can fulfill the order, it has only seven large blue sweaters left in inventory. But another store (store B), one with the ability and proximity to meet the customer promise, has twenty-five large blue sweaters in stock. It is more beneficial for the retailer to prioritize the use of inventory in store B over store A to deplete the large amount of inventory in that store and avoid costly markdowns. Manhattan Associate’s Omnichannel Fulfillment ROI Calculator estimates that improved fulfillment optimization can help retailers reduce the costs from markdowns by up to twenty-five percent.

Many other scenarios exist where the use of inventory can be optimized to ensure customer promises are met while improving profitability. For example, retailers can use store inventory to fulfill an order with standard shipping to avoid the cost of splitting a shipment from multiple distribution centers.

Order management systems with intelligent fulfillment optimization capabilities can provide the real-time fulfillment sourcing optimization that helps retailers to deliver on customer promises while improving profitability, regardless of inventory network size, complexity or topology. Such capabilities use advanced learning algorithms that adjust and readjust to a combination of inventory availability, constraints and business conditions in real time to continuously optimize how inventory is used in fulfillment.

Manhattan Order Management with Adaptive Network Fulfillment (ANF) uses intelligent fulfillment optimization to evaluate large numbers of parameters across inventory, fulfillment, transportation, stores and customers in real-time to ensure customer order commitments are met while maximizing the profitability of digitally-influenced orders. For example, ANF calculates and considers opportunity costs such as inventory depth/rate of sale in determining optimal fulfillment routing. Opportunity costs allow merchants to weigh for evaluation spending slightly more in shipping in order to leverage a location with deep inventory.

You can learn more about how it works and the business benefits it delivers by visiting Manhattan Active™ Omni Adaptive Network Fulfillment and using tools like our Omnichannel Fulfillment ROI Calculator.

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