According to RSR’s (Retail Systems Research) benchmarking report regarding the Internet of Things (IoT), which was released at the end of last year, 98% of ‘Real Winners’ (defined as those that are the most successful in the industry) describe inventory management across the enterprise as incredibly important, and driven by the IoT. The role of the IoT, and not simply inventory management alone, is an interesting take and points toward the IoT unexpectedly helping with inventory management and not just customer management.
The reason that the IoT is highlighted as being of great importance in inventory management in the RSR report, and indeed being described as the ‘leading’ inventory management tool, is largely down to the omnichannel landscape retailers are now operating in. Profits are greatly affected when inventory cannot be easily located. This is further complicated by unique omnichannel approaches such as ‘BORIS’ (Buy Online, Return in Store). Inventory is, quite literally, moving between channels just as much as the customer is. This is also whilst return rates for e-commerce are notably higher than in traditional retail.
This spells out one huge problem for retailers: visibility. How can you see where a large chunk of your stock is whilst it’s ‘in the pipeline’ between places? For example, an online shopper may take a while to return an item, then returns it to one of your stores where the product isn’t even stocked. Store staff consequently may be less inclined to action the return in a timely manner. The visibility problem is further compounded by accuracy – this plethora of transactions is incredibly difficult to ensure accuracy over. This impacts profits negatively as well as other problems such as ensuring high enough working capital.
How the Internet of Things Helps
The IoT helps this situation by improving inventory management in terms of efficiency, visibility and accuracy. It becomes the tool through which you can trace each and every specific item. This is a central tenet of the report by the RSR – use the IoT with an inventory focus, not a customer focus. The concept should be to use the IoT to “manage inventory rather than customers” where you may run into data protection problems anyway.
At present, this makes the best sense on several fronts. There has been a great deal of talk over the last few years about using the IoT with a focus on the customer – to increase their experience with you as a retailer, to customise and make their experience bespoke. Certainly, the IoT has this potential. However, the RSR report is suggesting this waits until both consumers and the industry is truly ready for this shift in ‘how things are done’.
Instead, in the meantime, retailers can make use of the IoT technology available to be their eyes and ears on the inventory itself. This way profit loss can be minimised by increasing visibility, efficiency and accuracy. This has the added benefit of getting you comfortable and knowledgeable in your use of the IoT, and specifically its vast amount of data, before using it in other ways.