Aligning Physical Inventory With Virtual Availability

As retailers embrace an omnichannel future, one of the biggest challenges they face is inventory management. Location-specific inventory is a relic in the era of omnichannel fulfillment. Inventory is now distributed, decentralized, and constantly in flux, so retailers can serve their customers across a wide array of fulfillment channels. But it’s difficult to manage without the right framework.

Effective omnichannel inventory management requires thinking on two fronts: total available products and the location of each item, aka digital vs. physical inventory. To consistently meet customer expectations, physical inventory must align with virtual availability.

A tale of two inventories

Think about digital vs. physical inventory in the context of the buying process. Digital inventory is the total available inventory retailers can put into the hands of customers. This is aggregate inventory, and it’s important to have because it opens opportunities for more sales. Meanwhile, physical inventory refers to the actual location of products within the retailer’s network. Where a product resides can inform what it takes to mobilize it for different fulfillment channels.

In practice, these inventories represent the same thing from different perspectives. Virtual inventory is the retailer’s total opportunity for sales; physical inventory is the logistical starting point for each sale as the product moves toward specific fulfillment channels. Connecting the dots means aligning digital and physical.

Creating cohesion between inventories

Retailers need to leverage digital inventory to sell products, which they’ll eventually fulfill in the form of physical inventory. To that end, the figures must line up. If online shows a stock keeping unit (SKU) as “10 in stock,” there should be 10 physical items collectively within a localized inventory pool. Likewise, advertising 10 if you have 20 means losing out on potential sales. Retailers need to show “true inventory” at all times.

Inventory alignment is also critical to order fulfillment. Consider a customer browsing a mobile app. A product listing might say, “out of stock at your location” but include options for “ship to store” or “ship to home.” These options are only possible if retailers present the correct digital inventory with knowledge of its physical location. This is how retailers successfully leverage digital aggregate inventory in physical fulfillment.

Miscommunication between inventories can cause a host of problems for retailers, even beyond canceled orders and missed sales. Lost inventory, skewed sales projections, and customer dissatisfaction all negatively affect the bottom line. Cohesive inventory has numerous positive effects, including sales efficiency and faster throughput.

Building a bridge between digital and physical

There are a variety of ways to create synergy between digital and physical inventories. Cohesion depends on checks and balances: how items are received into inventory and how they’re monitored throughout their inventory life cycle. A simple example might look like this:

• SKUs are received into inventory with details about location and total quantity.
• Sold SKUs come out of inventory with total aggregate inventory updated.
• Transported SKUs are scanned at departure and arrival to update their location.
• Total quantity and location are updated when SKUs are returned to inventory.

New inventory must be counted as part of the digital pool as soon as possible, whatever its physical location, to enable continuous sales. This sets the tone for successful inventory transport and fulfillment. Whether the customer buys online or in the store, items must come out of inventory in real time to prevent fulfillment issues.

At every stage of a product’s journey to fulfillment, retailers must know exactly where and how many. Visibility and accuracy are paramount.

Inventory is dynamic

Effective omnichannel inventory management demands real-time alignment of digital and physical retail inventory. With a running digital aggregate, and dynamic systems for managing physical product and fulfillment channels, retailers can mobilize their inventory to capitalize on an expanding sales map — and enhance the customer experience in the bargain.

To learn more about creating a cohesive omnichannel retail inventory, visit nextuple.com.