Three Hidden Truths About Your Store Inventory

Do you fulfill from your stores, either through shipping or in-store pickup? Do your store associates offer customers the opportunity to buy items located at your other stores? Do your direct channels allow customers to look up store inventory for a particular product?

For any retail chain operating today the answer to at least one — if not all — of these questions is ‘yes' (or even ‘yes, of course').

Store network inventory is a sought-after common resource in omni-channel operations. It plays a pivotal role in increasing online conversions, driving traffic from site to store, and improving the customer experience across channels. And yet, for such a treasured resource, typical store inventory accuracy is only at 65 percent at the size, style, and color SKU level.

This isn't news. Most retailers have had to accept that shelf-level inventory accuracy will be compromised in a dynamic environment like the store. But while we bide our time for affordable technologies like unit-level RFID tagging, there are practical options available now to improve inventory availability and even with RFID these options will be a key differentiator to grow both the top line and customer satisfaction.

There are, in fact, three "truths" hidden in plain sight around the units of inventory in your stores — truths that are waiting to be accepted and addressed to unlock incremental revenue.

Truth #1: Every unit is in motion.
Inventory rarely — we hope! — sits quietly on a shelf. At any given time, a unit of inventory may be in the customer's hands as the customer circles the store or heads to the fitting room. It may be in the returns pile, awaiting restock to the rack. It may be pulled off the floor for a customer who has purchased or reserved online for in-store pickup. Or, it may be in the process of being shipped to a customer's home.

In most of these scenarios, units of inventory are already being tracked by a system — whether through your fulfillment app, returns system, or point of sale. The issue is that many of these systems only send updates out every few hours or once a day, particularly if your inventory system of record is an ERP or financial software. Real-time changes are held captive to occasional batch updates. Meanwhile, your selling systems — online, in the call center and across your store network — may be losing opportunities to convert.

The solution here is to ensure that your store systems can provide real-time, incremental updates to an inventory system of record that not only accepts real-time feeds — but can also inherently understand the nuances of the state of the unit, such as Reserved, Returned, Pending Receipt, etc.

Truth #2: No unit is an island.
While it would be ideal to treat every unit at face value — either available to be sold, or not—there are many external factors that impact whether a particular unit is sellable. Take footwear, for example: keeping a SKU run intact across sizes of a style may be critical for the in-store experience. For this reason, it may be important that the last remaining unit of one size not be sold online if the rest of the SKU run has multiple units available. Here, it's not that the unit is in any way not able to be sold, but rather the status of the entire SKU run that needs to be taken into account.

Imagine, in another example, a store that is unable to ship out orders because of equipment issues (such as a label printer being out of ink). While the units in the store may be sellable to in-store customers and even in-store pickup customers, they need to be kept offline for any ship-from-store orders.

In both of these instances, the issue lies in having a system (or set of systems) that can take nuances like SKU runs and fulfillment ability into account, and then have those nuances play a role in how an order is routed to a particular store for fulfillment. For many retailers, legacy store and order management systems aren't sophisticated enough to accommodate these nuances.

Truth #3: No two units are the same.
From a systems perspective, it's common to see all units of a particular style, color and size to be treated identically. Particularly for e-commerce transactions being fulfilled from a warehouse, these units are essentially interchangeable.

In a store, however, a number of additional attributes shade the priority and availability of each and every unit to be sold. An item in the backroom of a store, for instance, could be more uniquely suited for satisfying an online order than another unit of that same item sitting in a promotional display at the front of the store. An item that's recently been returned can be sold online before it needs to be restocked on the store floor. An item that's damaged should be treated as unsellable — except in instances where it can be marked down. An item that's in-transit to the store, due to arrive the same day, could be considered available to be sold online, but cannot yet be sold in-store.

These nuances require a deeper understanding of inventory in the store, and the impacts such nuances have on availability for online and in-store selling. With legacy point of sale systems and e-commerce-focused order management solutions, these nuances are often lost for the sake of simpler system design.

Truth be told: inventory is more than skin deep
Store inventory is unavoidably complex — and these truths speak to a greater level of complexity than legacy systems were designed to manage. Addressing these truths pragmatically means you need to keep a couple of considerations in mind:
  • Detailed inventory management should be an extension of the work your store associates already perform — not an added task. To avoid the training and change management hurdles of introducing onerous new processes, nuanced information on inventory should be captured in the context of tasks your store associates already do on a daily basis —such as price ticketing, receiving, restocking, reserving, accepting returns, rearranging units and shipping. The systems you use for performing this work should be capable of tracking such nuances as part of those standard workflows.
  • Inventory management applications must be enterprise-aware: online sales, store network fulfillment, cross-channel service, supply chain visibility — these functions need to be intrinsically linked in order to gain the context that determines what can be sold through each selling channel and/ or the fulfillment method the customer prefers. The retailers we work with understand that an enterprise-wide order management system is the most natural extension for aligning the in-store execution with cross-channel service — as opposed to the POS and ERPs of the past designed to handle the ‘these are my units' philosophy.
The truth is out there — ready to help you capture new opportunities to sell your existing inventory. From real-time updates to operational impacts to nuanced inventory attributes, the ability of your systems to accept and help address these truths determine how much you can leverage your current inventory investments.

Vikas Aron is director of application design for Manhattan Associates, a provider of supply chain software and platform technology. 
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