Today, with smartphones in hand, shoppers are highly research-oriented when making a purchase. Data shows mobile research influences 36% (about $1.1 trillion) of in-store retail sales, and around 48% of online shoppers begin a product search on marketplace sites.
To accommodate these research-savvy shoppers, retailers are striving to promote their products across multiple platforms as well as in physical retail spaces in hopes of connecting with their target customers.
But this poses a unique challenge for retailers: effectively and efficiently managing inventory sold through various platforms in real time. Not only do they have to efficiently and accurately track stock counts, but they also have to keep enough on their virtual shelves without getting stuck with items they can’t sell.
Let’s look at some of the major challenges of inventory management in general, as well as how businesses are effectively tackling the nuances that come with it in the omni-channel environment.
The Challenges of Inventory Management
Inventory is often one of the top five business costs associated with running a business, and as a major line item, it can make or break a company—which is why proper inventory management is crucial.
What are some of the nuances of inventory management?
1. Managing cycle stock inventory
Cycle stock inventory is the portion of inventory the seller cycles through to fill their orders and that is refreshed after new items are brought in to replenish sold inventory. It sounds straightforward—but managing this constantly moving inventory on a day-to-day basis can be tricky because it involves variables such as changing demand and re-stock time.
With proper forecasting and a bit of safety stock, some businesses have figured out how to appropriately manage their cycle stock—but it takes time and data analysis to get this aspect of inventory management down to a science.
2. Maintaining accurate inventory
With constantly moving products in and out of a warehouse or storage space, it can be difficult to keep an accurate stock count. To remedy this, some businesses implement cycle counts, so a set of inventory is counted on a specific day.
In doing this, they can better gauge the accuracy of inventory without having to do a complete inventory audit. Items within the cycle count can help infer expected inventory errors for other subsets within the warehouse.
3. Demand forecasting
Having an over and under-supply of inventory both have major negative impacts on a business, which is why accurate demand forecasting is essential. Over-investment in the wrong inventory can tie up your cash, and under-investment in popular stock items can leave you scrambling to fill orders.
But by using a dynamic min/max inventory ordering method, some companies have found a way to more effectively keep the right stock levels in their warehouses with the help of performance-based triggers.
4. Storage organization
Unorganized warehouses and storage spaces are productivity killers—and can mean hours of wasted time spent searching out products for order fulfillment. Plus, having a disorganized product storage space can eat away at your bottom line, as employees’ time is wasted while executing this faulty process.
However, implementing a systematic and standardized sorting process can help make storage spaces highly efficient.
The Tip of the Inventory Iceberg
From a zoomed-out perspective, these four challenges are just the tip of the iceberg when it comes to inventory management challenges, but with the strategies we discussed and smart tools for more efficient inventory management, retailers around the world are discovering how to overcome these nuances.
These challenges are also part of the omni-channel selling equation. To see how these factors impact cross-channel selling, let’s look at one real-life example of how a retailer tackles management of its omni-channel inventory.
Case Study: How BeachRC Manages Omni-channel Inventory
In the early stages of the business, BeachRC, a RC racing supply retailer, struggled with inventory management across the various points of sale (like Amazon, their online store, and the brick-and-mortar store.)
“Managing inventory, in the past, was our Achilles heel—and we knew that getting this right was important, because if you get a new customer and can’t ship out their order, you lose them, and that’s your one chance,” said Brent Densford, the store owner.
After optimizing processes within their warehouse, they started looking for tools that could help them more accurately track stock on an ongoing basis. Ideally, they wanted a resource that would pull all of the store’s inventory tracking into a single space to save time and boost efficiency.
BeachRC decided to try BigCommerce’s Amazon integration to push products over to the marketplace while maintaining accurate inventory levels between the brick and mortar store (which produces 80% of the company’s sales) and the omni-channel side of the business.
With this resource, they were able to generate a much more accurate picture of inventory levels—which means more reliable demand forecasting and more effective management of cycle inventory.
And ensuring inventory levels match across their online store, the Amazon marketplace and their brick-and-mortar is vitally important. Square is how Densford makes sure this happens.
“Today, we’re using different platforms to push different products so we’re not stuck with inventory that’s not moving. Overall, we’re pretty much in the promised land where I don’t have to worry about what sold, because everything is working together seamlessly,” Densford said.
With accurate inventory, BeachRC can better move products from the warehouse out to consumers—and they’re spending far less time worrying about their ability to fulfill orders or moving slow-selling products.
Work Smarter, Not Harder
Will there ever come a day with inventory management is innately simple and nuance-free? Probably not in the near future. But with smart processes, accurate forecasting, an organized warehouse, and the right tools, businesses around the world (both online and off) will continue to strive to more efficiently manage inventory sold across multiple channels. From demand forecasting to tools that present a simple dashboard view of cross-channel inventory, inventory is becoming a little bit more manageable every day.
This article was originally published on the Fundera Ledger on March 15, 2017.