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Can Innovations in Inventory Tech Save Retailers From Themselves?

Retailers are largely getting the inventory equation wrong, but a swell of new tech promises to help them right their errs.

The first step, however, isn’t determining what data to collect or how to collect it, it’s simpler—and perhaps more obvious—than that: companies need an intimate understanding of their own hang-ups in learning and delivering on what their customers really want.

It’s a fundamental of the business that’s fallen by the wayside as companies get caught up in the shiny new tech they think they should have but don’t yet know what to do with.

“It does come back to getting back to your fundamentals and looking inward and saying ‘where do my problems actually lie? Do I have an understanding of who my customer actually is, what they want, how it’s changing over time? Is there an issue with speed of production?’” Natan Reddy, senior intelligence analyst at CB Insights, said speaking on a panel at Sourcing Summit New York last month.

“From that point, you can actually take a look at some of the emerging technologies that are out there and find the ones that are the most appropriate for you,” he added.

As the apparel industry piles onto its problem of too much inventory with buys that aren’t based on true visibility, and threatens the sustainability goals they’ve set for 2020 with a glut of garments bound for landfill, more startups are stepping in, endeavoring to offer solutions.

“In the last two or three years since I’ve been covering the space, there’s been a huge explosion in the amount of startup activity I’ve seen in inventory management across the supply chain,” said Reddy, who focuses on tracking emerging technology ecosytems in supply chain and retail.

And the funding for it is rolling in, too.

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“Back in 2014, supply chain startups, globally, were only receiving about $1.5 million a year from investors and that’s already gone to, I want to say, $13 or $14 billion as the projected amount for this year,” Reddy said. “That’s a pretty big increase just in the last several years and specifically within the inventory management space, we’ve seen a number of big things happen in the last year.”

Relex, for one, which provides retail optimization software to leading retailers like Marimekko and PetSmart, saw a $200 million investment from TCV in February. The growth equity firm considers Relex “poised to grow to dominate global markets.”

“We are impressed by Relex’s modern, highly flexible and cloud-based software, as well as its exceptional data processing performance,” TCV general partner John Doran said at the time of the funding announcement. “Relex has very high customer satisfaction with customers benefitting from inventory and waste reduction, improved stock availability, more efficient goods handling and less time spent on ordering.”

The need for improved inventory management is evident, and big apparel companies are bringing in the expertise to get it right.

Nike made a move to do so in August when it acquired data science and demand sensing expert Celect, with Nike chief operating officer Eric Sprunk saying at the time, “As demand for our product grows, we must be insight-driven, data-optimized and hyper-focused on consumer behavior. This is how we serve consumers more personally at scale.”

Celect’s cloud-based analytics platform offers what Nike calls “cutting-edge” proprietary insights that help retailers optimize inventory across the omnichannel landscape through “hyper-local demand predictions.”

Those focused demand predictions will drive more accurate buys, which should yield more thorough sell-through and leave less inventory waste with no viable home at the end of the season. It’s also the key to lessening environmental impact, the concept at the root of all sustainability efforts.

“Our ability to actually lessen our impact…going forward that’s something that’s going to continue be an issue and maybe even affect politics or consumer preferences going forward,” Reddy said.

“When you look at a lot of the technology that is arising in the space…we tend to bucket it into three categories: automation, but also visibility and connectivity,” he added, “and I think those latter two…are actually more important when you’re thinking about how to make your supply chain more flexible.”