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Why Retailers Report Inaccurate Inventory 40 Percent of the Time

Brands and retailers need to move buying and allocation decision-making upstream if they want to make the biggest financial and operational impact in their supply chains.

That’s at least according to John Andrews, CEO of Celect, who spoke at Inturn’s Working Capital Summit on Thursday.

Addressing inventory lifecycle issues, Andrews said that because “no one has a crystal ball,” retail stakeholders must look to data insights to get a better sense of what’s going to happen and to optimize process accordingly. Data can help retailers understand trends and the opportunities they present.

“The transformation retail is going through is leading retailers to adopt more of these insights and incorporate predictive analytics into their processes,” he said.

Some retailers hesitant to bring data into their operations have warmed up to its benefits. Andrews pointed to comments made by Barneys New York’s CEO Daniella Vitale at the 2017 WWD CEO Summit, at which she said the high-end retailer was resistant to bringing data into the mix because “they set the trends.” But, Andrews explained, after Barneys started looking at data over a period of nine months, the company started to realize that data gave them the reassurance to make bigger, riskier bets and be more confident with their decisions.

Fast-fashion retailers are a great example of how data can drive results.

“Fast fashion works because they’re not leading the trends,” Andrews said. Instead, they look at how customers and products are interacting at granular level. To capture that same type of fast-fashion success, retailers should examine product attributes to identify the kinds of things consumers are liking, and tease out the insights from “How can that inform decision making in terms of what we’re bringing into inventory?” Andrews said.

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Though many brands and retailers have rich stores of data, it often is “buried” with just a few employees, Gina Ashe, CEO of ThirdChannel, said. Perhaps the planners have it but the analytics team could make the most of it, she explained. “When data is shared, workers are empowered to make better decisions,” Ashe said.

She also spoke of a “natural tension” between branded manufacturers and their retail partners, who each have conflicting priorities. While brands want their product to be the top seller for the retailer, the merchant doesn’t care which brand sells—as long as consumers are buying, Ashe explained. “Retailers are focused on category optimization,” she said. Her company, which works with manufacturing brands to uncover opportunities to grow sales at retail partner, offers a service that dispatches people to physically visit stores and clean up a brand’s displays to ensure products are presented in the best light and located in the right place.

“As much as 40 percent of the time, the retailer’s systems are reporting inaccurate inventory, such as ghost inventory,” Ashe said, referring to inventory that’s technically in the system but not actually available for purchased often because it has been misplaced.