Omni-Channel Inventory Management

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Omni-Channel Inventory Management

By Caterina Pontoriero - 10/06/2011
Now that the vast majority of retailers are operating in multiple channels, inventory, fulfillment and order management have become far more complex processes within the retail enterprise. At the most basic level, managing inventory for a chain of physical store locations is far different from fulfilling individual customer orders from online channels, mobile commerce sites, or now through social retailing via Facebook.

But the inventory and order management challenges retailers face in today’s environment go further than the difference between bulk deliveries to a store’s loading dock and drop-shipping an individual item to a customer’s home address. One of the biggest challenges is the omni-channel nature of retailing today. Customers are exerting more control over how, when and where they want their orders to be fulfilled — and with the widespread availability of mobile options, a retailer’s ability to meet the fulfillment request can mean the difference between gaining and losing a sale.

However, the remarkable growth rate of omni-channel shopping behavior has kept many retailers playing catch-up. One of the reasons it’s been difficult for retailers to improve such cross-channel functionalities is that many still maintain separate inventory streams and order management systems for their different sales channels.

Inventory Visibility is a Priority
Industry experts agree that the first step retailers need to take to address these challenges is to achieve true inventory visibility on an enterprise-wide basis, and to maintain that visibility on a real-time or near real-time basis.

Without inventory visibility, retailers cannot confidently make promises to customers about product availability, shipping options or delivery dates. When store associates can locate an out-of-stock item somewhere else in the retail enterprise, and provide a potential customer with accurate, up-to-date information about where and how they can purchase it, retailers significantly improve their ability to match their inventory with actual customer demand.
Achieving this visibility — and accurately maintaining it — can be a significant hurdle for retailers, particularly those that have legacy inventory systems that are closely tied to individual channels. However, many inventory management solutions now offer cross-channel inventory visibility, providing centralized databases that maintain accurate item counts and provide this data to those throughout the enterprise that need it.

According to the 2011 RIS/Gartner Retail Technology Study, one-third of retailers have already achieved real-time inventory visibility, and just over one-quarter of respondents plan to start the process within the next two years.

Optimize Inventory Movement
Centralizing inventory data also allows retailers to apply better business logic to their allocation and replenishment decision-making on an ongoing basis.
Today’s omni-channel environment allows retailers to get ahead of demand, responding not only to sales that have already taken place but to customer interest in a product. Monitoring online searches of the retailer’s e-commerce website or social media chatter can provide an indication of consumer interest in a product or category in a certain geographic area, or among a particular customer segment. These anticipatory demand signals can be used as part of a retailer’s allocation and product movement decision-making.

In addition, retailers that can link their merchandising, inventory and marketing systems can do even more to maximize inventory margins, selling more product at full price and minimizing markdowns. For example, if an apparel item is nearing the date when it will be marked down in a physical store location, it can be promoted in a retailer’s online channel to customers who are likely to purchase it at full price, such as shoppers who had purchased similar products in the past.

Mobile marketing adds another dimension. If a store is overstocked on a particular item, the retailer could send text messages to the mobile devices of customers in the store’s trading area that are likely purchasers of the product.

Managing Order Management
Along with centralizing inventory data to achieve greater visibility, many retailers are seeing the benefit of centralizing order management from multiple channels. Centralization helps retailers maintain a single view of each customer, even as the customer’s shopping journey consists of multiple stages.

Centralized order management also allows retailers to modify or add to transactions that began in one channel and are completed in another. One of the main reasons retailers make the effort to offer buy online/pick up in store capabilities is that building store traffic often leads to additional sales.
However, this opportunity remains largely unrealized for many retailers. Even among leading-edge retailers,  the most common processes for in-store fulfillment involve manual picking and packing of items, with payment processed via the in-store POS system.

Many retailers are still trying to bring their cross-channel capabilities in line with rapidly rising consumer expectations, and a good number have already made significant strides.Technology will continue to play important roles as retailers grapple with the new and emerging requirements around this crucial investment area, providing solutions that will help them maintain margins while continuing to satisfy shoppers. 


This article is an excerpt from the RIS report, “Inventory and Order Management in an Omni-Channel World.” To download the full report, go to www.risnews.com and click on the “Thought Leadership” tab.