Inventory has always been one of the biggest risk factors for retail. Even the best case scenario for unsold items involves significant markdowns and/or selling to off-price retailers to recoup initial investment. Just a few quarters of sales disruptions (like some retailers are experiencing with COVID-19) can lead to bankruptcy as capital remains frozen within unsold inventory and revenue dries up. Ascena and Brooks Brothers are facing that grim reality right now.
Without robust omnichannel programs, retailers have less assortment, sell less of their inventory, and offer much less customer choice. All of which translates into lower growth and revenue. And yet building a scalable omnichannel program is a labyrinth of financial, technical, and multi-team challenges that can quickly turn into a money-pit with little or no growth to show for it.
In the coming year we’ll be adding some cool data features to the Dsco platform that will allow trading partners to not only access such data but perform just these types of correlations with their own data in real time to tackle issues such as excessive upgrades, late shipments, and cancellations.
Super Bowl assortments, filled with apparel, home goods, and jewelry merchandise, are usually drop shipped because of inventory availability and other supply chain considerations. Unfortunately, a small number of retailers are dropping the drop ship ball by including products featuring the likenesses of players no longer on rosters of the Super Bowl teams. In one example, a major retailer is featuring a wall decal of a former player that has not been on the roster since 2012!
Both retailers and brands need to make sure that they have the technical capabilities to handle the much higher amounts of data exchange and analysis that is required in this new data driven world. Their entire supply chain needs to be turned into an intelligent cooperative network that is able to adjust in real time to real world trends and unforeseen events.
The Power of Supply for Digital Marketing, Part Two – Four Steps of Inventory Visibility to Lift EBITDA and GMV
This concept doesn’t just apply for seasonal offerings, it works for any product where demand is high and restock may have some latency. Where this is happening, having good supply partners who are 1) telling you restock timelines systematically and 2) are willing to drop ship from factories to bypass the full truck route, will make these sellout momentum playbooks smarter.
The problem with safety stock buffers, however, is that they represent unsold inventory. A 10 item buffer across all of a supplier’s inventory means absorbing a lot of opportunity costs to prevent cancellations
From all of the presentations and panels that I attended, it’s clear that retailers are going all in with using their store fleets to fulfill online orders.
This is a really interesting strategic move considering that, as noted above, stores have the lowest accuracy of any inventory asset in retail. It therefore highlights the difficult choice that retailers face.
If order volume grows at 20% per year, a retailer will have to invest in doubling its fulfillment capacity every five years. This is what we’re seeing with Amazon but it’s not something anyone in the supply chain would look forward to doing. Building new FCs is expensive, time consuming, and risky.
Expanding inventory data improvements to include suppliers is therefore essential for brick and mortar retailers to achieve success with digital consumers. It will require data technology that takes the complexity and cost out of inventory integration across hundreds of different systems while processing all that disparate data into a single source of truth in real time.
When you are watching the World Cup this summer, you might be surprised to learn that over 100 national team players played in the EPL last season. These players likely started in youth academies, were involved with clubs that have been promoted or relegated, and are probably wearing smart trackers under their jerseys to generate data. Similar innovations can be applied by enterprise retailers to elevate their drop ship programs to championship form.