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.