The importance of efficient omni-channel inventory management is a theme we’ve blogged about fairly regularly. If you haven’t read our posts ‘Managing the Supply Chain in a 50:50 World’ and ‘Availability is key – An omni-channel story’, they’re well worth checking out.
Any online retail operation, whether it’s an omni-channel business or pure e-commerce, generates an astonishing wealth of data. It’s not just sales figures, it’s page visits, duration of activity, click-throughs to other products, conversion rates from visits to sales and so forth. This data is incredibly useful in helping you understand and serve your customers better and in turn helping yourself by reducing stock, improving availability and boosting your profits. In our ‘Supply Chain Planning in Online Retail’ e-book you can also read more about how to improve your omni-channel inventory management.
But not everyone gets it right.
The essence of why good inventory management should be at the front of all retailers’ minds
Working from home is often a challenge. I find it’s important to create an ‘office environment’ so that when I go into my home-office I change from a ‘home mindset’ to a ‘work mindset’. An important part of this is being organized, and now I needed a file cabinet to take care of the papers that have started to pile up.
I’d already outfitted most of my operation. For basic supplies such as folders, printer paper, pens etc., I typically end up going to Target. As a rule, I check online first because, even though they have a store less than a mile from where I live, it makes sense to check they have what I want rather than have a wasted journey. Then, if they’ve got what I need, I jump in the car. But for office equipment, I generally turn to one of the major office supply chains – let’s call it The Giant Office Chain.
Data is incredibly useful in helping you understand and serve your customers better and in turn helping yourself by reducing stock, improving availability and boosting your profits.
And now, needing a file cabinet, I turned once more to The Giant Office Chain. It’s a little further from my place, about five miles, but that’s OK, so long as the traffic isn’t too snarled up and I can ensure they have what I need in-stock by looking at their online selection. Having browsed their selection of attractive office furniture on their website, I settle on a handsome two-drawer unit that was listed as available in the nearby store. Great! It felt like my lucky day. That is until I actually turn up at the store and find a member of staff who tells me that the display model they have is the only one in stock and I can’t have it because… Because why? It’s the only one they have. What are they going to use it for? Taunting customers with a cabinet they want, but can’t buy?
However, the assistant is kind enough to look on their system and sees that there’s one at another branch of The Giant Office Chain six more miles down the road. Well you know how it is. I don’t really want to waste more time on this, but I’ve already invested one lunch hour and I’d rather come back with the cabinet. So I carry on.
After grinding through six miles of city traffic I arrive at the store on a mission. I head in and find an assistant knowing exactly what I want. We go right to their display number, he scans the bar code and… according to the retail management system there’s none in stock. In fact, according to his system, there’s only one available in all The Giant Office Chain’s stores in the whole of the Minneapolis-Saint Paul area, and that one is thirty miles away. I returned home, empty handed.
Am I disappointed? Well you could put it that way. Do I feel all warm and fuzzy towards The Giant Office Chain? No. Would I rush back there next time I want something and rely on them to actually do their job and make sure their availability numbers as displayed online bear some sort of relationship to reality? Perhaps, but only as a last resort. My trust in them has taken a serious hit.
What does this mean for an omni-channel retailer?
Now from an e-commerce inventory management point of view this situation makes no sense. So what’s the take away?
Well firstly Giant Office Chain lost a sale and they probably have no idea. Not all items substitute easily. Second this same scenario is probably replicated right across their assortment and in their stores across the United States, not just with file cabinets, but with any number of substantial items. If their omni-channel inventory management system can’t keep track of file cabinets then it might not be keeping track of desks, chairs and electronic items either. How many sales are they losing through poor inventory management?
If their omni-channel inventory management system can’t keep track of file cabinets then it might not be keeping track of desks, chairs and electronic items either.
Thirdly, there seems to be a major visibility issue. As with understocks so with overstocks – and overstocks mean markdowns; excessive and avoidable markdowns.
Fourthly, what’s the point in putting a lot of time, effort, and money into omni-channel inventory management systems and processes that should allow consumers to buy anywhere and via any channel, but spoil it for the customer because the inventory management/support is lagging behind.
And we’re not just talking lost sales here, we’re talking lost customers. Giant Office Chain just wasted a couple of hours of my time because it can’t run its business efficiently. With modern e-commerce inventory management having the right inventory in the right stores at the right time and having retail inventory systems that give an accurate picture of what items are actually there is no longer a ‘nice to have.’ It’s a basic.
Right now I’m thinking I’ll order one online because, frankly, the delivery charge is less than the value of my wasted time. It’s the kind of error that, repeated often enough, could end up turning Giant Office Chain into a dwarf.
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- MIT Research: The Effects of Dynamic Safety Stocks on Inventory and Service Levels
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