Inventory as an Asset

Effective forecasting, replenishment, and inventory management improve your inventory across channels and create a better customer experience.?

Inventory isn't just a cost line on the balance sheet – it's likely one of your biggest investments. For example, Macy's reported ~6.1B in inventory for Q3 21, which accounts for more than 80% of current assets. Inventory control isn't just a vital balance sheet number; it's also a critical customer experience factor. Let's quickly cover the basics. ?

Inventory insight allows retailers to see what is on-hand and on-order in every location by channel. Accurate forecasts mean the business runs more efficiently by buying the right inventory, for the right location, at the right time to satisfy customer demand. Replenishment planning provides the knowledge of how to buy inventory, when to buy inventory, and how much inventory to purchase or maintain on hand to optimize stocks while remaining productive with your asset.?

According to a Multichannelmerchant.com article , retailers that have invested in inventory management tools that supply real-time visibility across channels are faring much better than those that didn’t as tactics like ship-from-store and curbside or counter pickup are proving to be survival factors.

Why does updating your inventory systems and processes matter to your customers?

• Customers expect accuracy and consistency. According to a 2021 study by LaserShip , 87% of retailers have implemented some form of in-store pickup (BOPIS).
• The same study also reported more than half (57%) of those retailers struggled with in-store stock availability to meet customer expectations.?
• "Right place, right time" inventory strategies drive top-line sales and maximize inventory ROI by avoiding lost sales, reducing safety-stock needs, and minimizing markdowns.
• Real-time inventory visibility is vital to ensure order management systems know which products are currently on-hand. Avoid unnecessary upcharges in supply chain fulfillment, delivery delays, or (worse) canceled orders.
• Today's customers will choose retailers who provide the most seamless, flexible, and timely shopping experience. Effective inventory management allows you to meet your customer's needs on their terms - how or where they want to shop, and when they need it.

Ineffective processes and lagging inventory visibility lead to unnecessary canceled or postponed orders and disappointed customers.

How can you improve your inventory visibility?

Relying on aging systems or legacy processes that don't consider new omnichannel requirements or changing customer buying habits makes inventory harder to manage. Forecasting solutions have evolved.?

People typically don't work efficiently at the detailed level that systems do, and systems can only forecast with the information that people give it. Newer forecasting applications have ways to leverage machine learning, seasonal forecasting models, better algorithms, embedded workflows, and off-the-shelf training to better capture customer demand and improve forecast accuracy. This picks up trends in customers' shopping habits, closing the gap on stock-outs.?

Stock-outs not only lead to lost sales but, even worse, bad customer service and reduced customer loyalty. When a customer leaves disappointed, they feel let down that you didn't have what they needed, especially in those essential items that drive your business. There are some simple ways to ensure that you stay in front of those out-of-stock situations. The key to keeping your customer loyalty high is to be proactive with your inventory.

Pay attention to your customers' current shopping trends and past behaviors. A good forecast is a blend of the two. The forecast drives your replenishment systems, setting safety stock for those tried-and-true sellers, and those identified items with constrained supply ensure fewer stock-outs.

Current world events are disrupting business, and it’s critical that retailers have their inventory systems in order. The most successful companies have found the right balance of people, processes, and systems. They have emphasized all three, knowing that they all play a crucial role in ensuring the right product is in the right place at the right time.

About the Authors of this Article

This article was written by the Planning Team at Evolve Information Systems, which includes Zack Nees, Janelle Pierce, and Marta Velkers. At Evolve, we have a team that has “been there, done that.” We provide consulting leadership in forecasting, planning, and inventory management and ensuring effective unified commerce practices are implemented. Our group has worked in retail, we have implemented the processes, systems, and training to support the teams executing these practices and managing these assets. We are passionate about customer experience and partner success.

Make sure to check out one of our other Evolve articles, Simplifying Unified Commerce in 3 Steps

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