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To Master Order Fulfillment, Retailers Must Get Real About Inventory Inaccuracies

Online retailers (and consumers) are enamored with the concept of the “endless aisle,” and the seemingly infinite possibilities that omnichannel retail provides. But the reality is, the aisle does end. it stops at the outer edges of the retailer’s inventory management system.

“Low stocking of certain products always brings forth a set of risks when dealing with in-store pickup mainly, but also with ship to home,” said Nelson Flores, chief data scientist and senior director of product strategy at Kibo. Failing to light up inventory properly can thwart omnichannel capabilities and negate the benefits that draw customers to the shopping format in the first place.

With the turnaround wait time for BOPIS and ship-to-home buying is so vital, retailers that don’t coordinate in-store stock with online demand are doing customers a disservice.

Some retailers attempt to handle inventory challenges by strategically allocating stock in certain locations, which helps online shoppers but can have repercussions if retailers don’t have eyes on their inventory. “Ship-from-store programs inherently allow for lower stocking at certain locations,” said Flores, “with higher stocking locations being able to supplement stores with little-to-no inventory for certain products.” But that runs the risk of alienating in-store shoppers who have to go out of their way to find items in person, added Flores, which means retailers must strike a careful balance.

Djamel Toubrinet, senior product marketing manager for retail at Cegid Americas, said some retailers are getting in over their heads with their fulfillment options. Toubrinet emphasized that brands need to master rudimentary capabilities like efficient sourcing and allocation before aiming for cutting edge options like BOPIS and same-day delivery.

“These technologies are what customers are looking for, and retailers need to adapt to that,” Toubrinet said, “but if they don’t have a good grip on the retail basics, like inventory accuracy and precision, then it’s a moot point.”

He said the skills gap is due to culture, especially around the supply chain, that prevents retailers from investing time and money in upgrading their tools. “Unfortunately, retail is one of the industries that spends the least on technology,” Toubrinet said. “The way people buy has changed tremendously, and most retailers take a band-aid approach.” That leaves retailers on an “island” of sorts, Toubrinet explained: too far into the 21st century to effectively use their legacy technologies, but too far behind digitized brands to catch up.

Retailers can also leverage their online capabilities to gain deeper insight into what drives purchases. That’s one of the advantages of being constantly keyed in on inventory, said Flores—it gives brands the chance to mine their data and meet demand.

For instance, some retailers will keep products online to get a sense of whether they’re worth bringing back into stores, or gauge customer interest in those categories. In some cases, retailers might then dropship items directly to a customer’s house or find other means of fulfillment. “From there, their order management platform needs to be able to handle limited availability or future-dated products via capabilities like backorders, or inventory safety stocks,” Flores said.

Toubrinet pointed out that many retailers still don’t understand the scope of their inventory problems. He cited a study by Auburn University that found most retailers had inventory accuracy in the 65 to 75 percent range, though some brands refuse to believe that percentage could be so low. “In other words, one out of every four times, you’re going to disappoint the customer,” Toubrinet said.

Flores agreed, adding that the biggest stumbling block in the order management space is correctly setting consumer expectations. Collecting demand data, managing safety stocks and having real-time stock validation are all ways to do that—but retailers have to take the leap and modernize their inventory management, Flores added.

Both Flores and Toubrinet remain confident that slowly but surely, even sluggish retailers will realize the benefit of optimizing their order tech. Toubrinet said that eventually, retailers will feel the shift as their own engineers and executives slowly become more digitally-oriented. “New blood drives change,” Toubrinet said. “I’ve been through a few transformations. Whether it’s employees inside the company or consultants, that’s what drives the change—people.”

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