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inventory management

Top 7 Omnichannel Inventory Management Challenges for Retailers

June 14, 2022 by Multidev Technologies Leave a Comment

Omnichannel Inventory Management

As consumers begin to expect a convenient omnichannel shopping experience, the use of alternative fulfillment options such as click and collect or same-day delivery is steadily increasing.

Now, it’s vital to give customers what they want, when they want it, and where they want it. Yet this level of customer-centricity puts tremendous pressure on retailers to ensure their supply chains can deliver the promises they make.

Here are seven top challenges retailers face in adapting their inventory management processes to win in this new omnichannel world.

1. Accurately predict omni-demand

Identifying and forecasting omnichannel demand is not an easy task. There are hundreds of factors that determine the inventory needed for each store or warehouse. Some events have a predictable schedule and can be planned in advance, like Christmas or Black Friday. But other events are more difficult to predict.

On the other hand, more and more retailers realize that predicting physical store sales is no longer sufficient. They must consider the effect of inventory transactions such as BOPIS (Buy Online Pick-Up In-Store) or home delivery from the store. They must also pay attention to the time gap between the sales order and the fulfillment order.

2. Lack of inventory visibility

Inventory visibility is arguably the biggest obstacle to successful omnichannel management. Without inventory visibility, you can’t access data for accurate reporting or promise customers that item will be back in stock on all platforms.

And when you expand to new channels, inventory visibility is the common denominator. It’s the piece you need to put in place within a centralized system, so you never lose track across sales platforms.

3. Serial returns

When customers purchase online, they are much more likely to return items. According to a recent study, one-third of online shoppers deliberately overbuy and return unwanted items. Few of them admit to ordering multiple versions of the same item (in different sizes or colors), so they can make up their mind at the time of delivery. Therefore, it is essential to consider an increasing return rate as a critical factor in inventory forecasting and planning, both in stores and distribution centers (DC).

4. Defining and accounting for lost sales

How retailers define lost sales in an omnichannel environment continues to evolve and has many implications. In the old retail world, unavailability was calculated as lost sales by taking into account factors such as day of the week and substitute goods.

Today, if a customer wants to purchase a new pair of shoes, but their favorite shoe store is out of stock for that size, they can still place their order from an “endless aisle” for home delivery. However, the probability of lost sales changes depending on the delivery time. So how do we interpret this and factor it into inventory management and replenishment decisions?

Rethinking the role of stores to improve omnichannel execution performance helps retailers use inventory more efficiently and reduce lost sales. It also helps deliver more convenient shopping experiences. You can solve your retail inventory accounting method challenges with ChainDrive inventory management software.

5. Dynamic Replenishment Forecasting

As part of the inventory management software, automated dynamic forecasting calculations are therefore gaining importance. These calculations are used to predict the optimal quantities to order during the replenishment process. In addition to seasonal fluctuations, relevant inventory and sales data from each location are taken into account. Key figures such as minimum and maximum quantities for individual items at specific sites are then used to calculate the respective order quantities.

However, the retail industry will continue to undergo profound changes toward customer-centric processes. As this change occurs, the supply chain must respond effectively on the consumer side. Only with the right inventory management software is omnichannel customer orientation within reach for retailers.

6. High inventory storage costs.

You need to have a plan to accommodate more storage space and costs before you create any kind of omnichannel strategy. Above all, different storage areas for different channels and the demand planning behind them.

Without smart demand planning, you end up with potential dead stock that takes up space and ties up funds for other lines of business. So, you plan ahead to prepare for peaks and valleys in traffic, and you don’t have to hold flash sales to rush out inventory that will cost you more than it is worth.

This capability increases when you add warehouses or distribution centers. Inventory data can be shared and viewed across all your locations in an omnichannel inventory management system.

7. Omnichannel Retail Technology

The true backbone of an omnichannel approach is an inventory or warehouse management system. Omnichannel cannot be achieved manually. With an automated retail technology solution, every process is streamlined. At the same time, order fulfillment is synchronized across all channels. Inventory data is readily available in a robust set of reports so you can make better buying decisions. With inventory management software in place, users can enjoy the benefits of the solution and the software integrations that connect to other areas of your business. Imagine having inventory data, shipping labels, and market channel information all in one place, with complete visibility.

To satisfy the demands of omnipresent consumers, retailers must create new planning and fulfillment methods to provide easy, predictable, and cost-effective delivery to their customers while also ensuring that inventory planning is optimal for profit. Large retailers are beginning to adopt new software that integrates omnichannel execution, store inventory management, central warehouse management, and replenishment that enable seamless implementation of omnichannel processes. This allows proactive and flexible responses to changing demand at the individual store level. With the right omnichannel retail software solution and an honest customer service experience, retailers can build an optimized omnichannel inventory management platform built for complete visibility as they grow.

Adopting and implementing ChainDrive’s inventory optimization solution is at the heart of supply chain operations in this new world. Our omnichannel replenishment solution will help retailers assess and forecast customer demand and integrate omnichannel execution with store and DC inventory management.

If you want to empower your brand experiences to keep up with changing customer expectations with our omnichannel inventory management platform, request a free demo with one of our software experts.

Filed Under: Inventory Management Tagged With: # inventory management best practices, #inventory management software, #inventory management system, #omni channel inventory management system, #Omnichannel inventory management, #Omnichannel inventory management software, #Omnichannel Inventory Software, #Omnichannel Retail challenges, #Omnichannel retail strategy, #retail inventory management software, #retail tips, #retailers, inventory management

3 Retail Inventory Accounting Method Challenges Made Simple With ChainDrive inventory management software

July 29, 2020 by Mercy Gracy Antony Leave a Comment

One reason retail operation manager uses the retail inventory method of accounting is because it is quick and efficient to arrive at a current value of your inventory. However, it is neither accurate or sufficient. That’s why it’s important for retailers to perform a periodic physical inventory count. How often that count is performed is entirely up to each retail business, but it should be done two to four times a year is better. Retailers have to be able to respond to the changing business landscape, adapt and change, and pivot as often as possible is the new normal.

What is The Retail Inventory Method?

The retail inventory method is based on the cost of merchandise and how much you list your products for at retail. Accountants usually start with the cost of merchandise and divide it by the retail price to determine the cost-to-retail percentage. Next, you calculate the cost of goods available for sale. Then you calculate the cost of sales by multiplying the cost-to-retail percentage and sales amount for the period. Finally, you calculate the ending inventory by subtracting the cost of sales from the cost of goods available for sale.

Why the Retail Inventory Method is Not Always Accurate

While there are benefits to using this accounting method, there are few issues and challenges to reckon with. Here are three problems with the retail inventory method that retail operations managers should be aware of from the beginning:

1. It only works if you have a consistent markup across all products in your inventory. If you have products with wildly different markup percentages–and most retailers do–then your estimated ending inventory for the period could be off target drastically. The more diversity you have in your inventory markup, the more often you should perform physical inventory; which is time consuming as you know.

2. It’s based on historical assumptions that may not necessarily be true. If your markup is seasonal or different from what it was at the beginning of your inventory cycle, then the ending balance will be skewed. If you’ve recently changed your markup, you might perform a physical inventory to get started on the next cycle on the right track.

3. If an acquired retail operation is bought by a larger entity with huge amounts of inventory that bares a significant difference in markup percentage, it will skew the ending balance of the acquiring operation. This can be avoided by working through the process separately for each entity.

Is there a better way to avoid these blind spots and common pitfalls? You bet!

How to Scale-up with ChainDrive retail inventory management software

1. Identify the trend : If you want to sell the right product to the right customer, you have to identify ahead of time the shifting consumer behaviors before they happen, otherwise, you won’t be able to stock the right merchandise at the right time; so keep an eye on the fashion industry, current consumer trend in the market and shifting business models.

2.Effective planning and budgeting: Planning your retail budget is very important in retail industry. You have to operate your business within your budget span, but you must also meet the pent-up demand of your customers. After you decided which products to buy, you need to contact the vendors and place the orders accordingly. A centralized retail system that helps you do that more efficiently will benefit your retail store for a long time and your business resilience along the way.

3.Tracking the product: It begins at the time of ordering. Once you order a purchase for bulk merchandise, you need to find out where that product is in the supply-chain. And you need also to follow it all the way to your warehouse. Thereafter you need to track it from the warehouse to your stores, into the customer’s hands or his/her doorstep.

4.Allocation of Products: it’s important to allocate the right quantity of each product to each point of sale location. Retailers that sell well in one location may not necessarily sell at all in another geographic location or zone. Understanding retail business cycles, crowd thinking and changing buying patterns of customers at each retail store are essential precautions and barometers to keep on the watch list of driving factors.

5.Replenishment: you have to identify the right time to replenish your supply of each product, you carry and re-order at the right time. You need an inventory management software system that is agile-ready and that can help you customize your replenishment cycle to meet your demands.

Whether you are an apparel, footwear, jewelry, sporting goods, department store, home decor or specialty retailer, ChainDrive inventory software offers both the precision needed to benefit you as a retailer and the agility to address the peculiar nature of your specific vertical or niche market.

ChainDrive’s integrated accounting solution will definitely help you better manage your retail operations inventory and accounting functions while keeping your books immaculate and optimal for different operations.

If you still have more questions on how to ramp-up your inventory management system or want to see live how ChainDrive can help you step-up your heavy-duty retail operations, contact our retail management experts or log on to our site to book a free demo and consulting session.

Filed Under: Inventory Management Tagged With: inventory management

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