Inventory Management is an integral part to any thriving supply chain, but comprehensive inventory management in omnichannel environments is absolutely critical. Get it right, and efficiencies create boosts to the bottom line. Get it wrong and it’s the equivalent to hoarding money under the mattress, or worse, letting it fall out of a hole in your pocket.
Whether you sell gardening equipment, office products or pet food, it is imperative that you have a visible and strong online presence. It’s mandatory for business in the modern world. Whatever you used to be, your business now operates in an omnichannel environment. Online sales in the UK have increased year on year by a staggering 20.7% according to the Office for National Statistics. Those online sales now account for 15.3% of all retail spending.
In parallel to the increase in e-commerce, is the consumers increasing expectation for demand to be met almost instantaneously. With big players like Amazon offering next day delivery, the state of flux that online sales bring to inventory management is evident. Therefore, highly refined inventory management is vital in all modern sales businesses, including both physical and online sales channels.
Inventory Management is central to your business reputation and your customer service in this omnichannel marketplace. Its effectiveness underlines your ability to manage fluctuations in supply and demand. It’s how you manage economies of scale. It’s how you shave off wasted costs and time due to warehousing and logistics.
What you should be doing to manage inventory…
Knowing how to manage your inventory is crucial to your success. Get it wrong and the effects will be felt instantaneously and far reaching. The modern consumer is a fickle character, and if you fail to meet their needs just once, they’ll be off before you can catch them. Here’s how to make sure your inventory management doesn’t let you down:
Think about appropriate contemporary stock levels
Not so long ago fashions and trends had a longer life cycle. Now opinions can change rapidly, technology can become obsolete almost immediately and the current generation of consumers are used to instantaneous gratification.
Old school inventory management relied on ensuring you always had a good level of stock – there, ready and waiting to meet demand. Now, finely tuned efficiencies determine the health of your profits. Stock sat waiting is costing you money. It risks becoming obsolete, and it costs valuable storage space.
No longer are ‘rules of thumb’ or holding ‘average demand’ inventories a good enough approach to stock levels. Achieving the optimal levels of stock, that balance service and cost, is a science and every item of stock you hold should be fully justified and minimised.
Accurate inventory management ensures that you can keep a much tighter rein on stock. You have complete visibility over demand, and can respond quickly and accordingly. Your inventory management techniques bring you valuable and accurate data to create these insights. It’s about creating a finely tuned balance.
Inventory management systems are critical
We all know, love it or loathe it, the old adage: the customer is always right. This poses some real headaches in the modern marketplace. The modern consumer is both savvier, and more demanding, than those of yesteryear. Consumers expect an experience that goes beyond their expectations. Therefore, you need to know your consumers and anticipate their needs, before they even know themselves.
This takes a multi-faceted approach. You need to nurture your brand’s appeal like you’d nurture a baby, you need marketing that is out of this world, you have to focus on forecasting demand and then you need inventory levels that ensure product availability, but mitigate the potential for obsolescence and over-stocking. However, in the omnichannel e-commerce marketplace, it’s not just the inventory levels that you need to consider, but also an inventory management system.
An excellent inventory management system puts real-time consumer data at your fingertips. You can utilise this data to not only ensure you manage stock levels appropriately, but also to feed through information for new product design and as a method of understanding and predicting the buying behaviour of your customer.
IKEA ranks highly, according to Forbes, as a highly successful brand. Once of the primary reasons for this is their inventory management system. It’s really in a class of its own. They have logistics personnel and systems prioritising inventory management and keeping an eye on everything at ground level. The result is a harmonious flow of products throughout the individual branches, which build sales and bolster loyalty.
Don’t stop at dispatch
Back to those big players: they have radically transformed the returns process. This was once a difficult element in online sales, but no more. If you want your business to thrive, you have to make returns as simple as your competitors do. Online buying brings with it an element of uncertainty you don’t get when browsing and purchasing in a physical store. Customers need to trust that they can return unwanted purchases quickly, easily, and without taking a hit to their own pocket. They also need to know that faulty or damaged goods will be quickly and efficiently replaced.
The only way to make this possible from the business side is to operate an inventory management system that does that hard work for you, keeps an eye on the flow of products, and adjusts stock accordingly.
The inventory management pitfalls to avoid…
Inventory Management is in a continual state of flux. It’s dynamic, and ever changing. This puts supply chain professionals in the position of continual monitoring, reviewing and evaluating. It requires juggling human talent and capabilities with inventory management techniques. There is, therefore, plenty of room for error. So, how do we avoid the pitfalls of inventory management?
Knowing where the pitfalls are, and how we frequently fall foul of them, is the first step to avoiding them in our own supply chain. Time and again, the same things come up. Let’s look at the problems, and importantly, how to circumnavigate them.
Spreadsheets that are out of control
A few years back inventory management required you to be a spreadsheet wizard. In fact, many businesses still operate their inventory management process in spreadsheets, which is absolutely fine for some manufacturing and B2B operations. However, spreadsheets just aren’t dynamic enough to work effectively in the B2C omnichannel environment where stock targets need to be recalculated in real-time.
By introducing an automated inventory management system, you are able to capture and react to demand signals quicker and mitigate some of the human error that is inherent in the populating of spreadsheets. An automated inventory management system removes a large number of the manual data entry points that are trouble spots for mistakes. With spreadsheets, mistakes have the potential to grow exponentially. This is before realising that a great deal of work and processes are often duplicated under a spreadsheet system.
Inefficient warehouse management
It’s time to scrub from our minds visions of warehouses as ‘stores’ that are often unwieldly, messy, and ad-hoc. Warehouse management is increasingly the make-or-break area of supply chains. There should be procedures and protocols governing a warehouse, combined with technology, making it as efficient as possible. A warehouse management system is an absolute necessity in e-commerce picking operations and the pick, pack and despatch methodology needs to be efficient and highly process driven.
We are also working in an increasingly mobile world. A few years ago, inventory management was a linear process as goods moved from point A to point B, before resting at point C. Now this method of working doesn’t exist in the same form, with distribution happening in mobile settings, including moving vehicles. Therefore, you cannot rely on one-in-one-out as an inventory management process. You need mobile inventories that can be edited in real time.
Extended supply chains
Over the last 20-years there has been an increasing trend for global sourcing, especially from the Far East. However, the manufacturing cost benefits of sourcing from the Far East are increasingly being eroded as labour and raw material costs increase. As the manufacturing cost benefit comes into question, then buying large minimum order quantities, filling containers and holding stock against extended lead times also becomes less favourable. In reaction to consumer demand, supply chains are increasingly becoming low volume and high frequency, so you should thoroughly investigate the cost benefit analysis of an extended supply chain. You need to balance the cost of manufacturing against the increased logistics costs and the increased cost of inventory, as well as the normal considerations of quality, control and environmental impact.
You simply cannot afford to work at a leisurely pace any more. If you don’t meet a customer’s needs now, then someone else will be all too happy, and ready, to step into the void. You have to be capable of fulfilling orders in lightning time. The only way this is possible in the e-commerce omnichannel environment is with a focus on highly efficient inventory management, supported by comprehensive real-time systems.
Inventory management that identifies the weaknesses and potential problem areas, and takes a head-on approach to managing them, is the inventory management that will survive in the modern supply chain, enabling a business to grow and thrive.
This is particularly relevant, yet difficult, for smaller and medium-sized businesses. The giant competitors that you face will have invested a vast amount of time and money into their inventory management, so that they can fulfil customer requirements quickly. It’s therefore very easy for the gap between the big players and small and medium businesses to grow.
However, these smaller businesses also benefit from their size. It’s much easier to implement an excellent inventory management system. It’s also much easier to personalise the experience. You can compete with the big players, if you give due attention to your inventory management. Get an excellent inventory management system in place and you can operate extremely efficient fulfilment processes. This will boost your reputation, and in turn, your bottom line.