Why retail inventory strategies must change in a customer-focused omnichannel world
Allocate Less and Replenish More
Contents
Step 1
Introduction
Omnichannel inventory management
Step 2
Allocate less, replenish more
Step 3
Widen the focus to planning
From the point of view of your customer, it's just so simple:
If one of your stores is out-of-stock in the colour I want, why wouldn't you be able to sell it to me anyway, and simply ship it to my home or work? And why wouldn't a voucher be usable both online and in the store?
1
So…where to begin?
There are countless reasons why delivering on the omnichannel promise is not nearly as simple as it seems to customers. None of these complexities matter to today’s demanding shopper, however. It's time for retail to step up to the challenge.
2
There's no single correct way to begin your omnichannel journey, but one very good place to start is with inventory:
Step 1: Omnichannel inventory management
the lifeblood of your business.
Learn more about why it makes sense to start with inventory
"It is my strong recommendation that customer experience not be confused with enhancing or building customer-facing technologies."
Listen to Vikas Aron, Director Product Strategy for Aptos, describe why he believes the first phase of your omnichannel journey should be to merge different puddles of inventory ownership — such as local, international, wholesale, ecommerce, and reserve — into one cross-channel inventory pool that is integrated with order management and logistics.
Close
audio is 1:10 long
3
Flexible and timely access to inventory is what enables use cases like 'buy anywhere, fulfil anywhere, return anywhere' and 'endless aisle,' all of which are just as essential to the omnichannel experience as a user-friendly website or edgy new mobile app. The process of breaking down inventory silos has wide-ranging operational implications, but let's look specifically at the logistics of moving inventory from one place to another.
4
Since the whole point of a unified inventory strategy is to be able to move stock as quickly as possible to where the demand is, it's important to be agile enough to move stock from any location to any location.
5
just because you can move inventory quickly doesn’t mean you should move inventory. Frequently relocating stock because it's in the wrong place is inefficient and costly. That's why an integrated allocation and replenishment strategy is a natural next step in your omnichannel journey.
But let's face it,
Balancing agility and efficiency
Yes, you want to be able to move inventory from a supplier or distribution centre (DC) to store A, then from store A to store B if necessary. But usually it's better to move it just once, directly to store B where it's wanted. Simple enough, in theory. But you also don't want inventory sitting in warehouses waiting for allocation, when it could be in a store tempting a customer to buy.
6
Allocation has traditionally been managed as a 'fire and forget' process, with decisions made well ahead of receipt and never revisited. Too often, this results in significant mismatches between demand and supply when actual demand patterns differ from plan.
Step 2: Allocate less, replenish more
7
Retailers further along on their omnichannel journey instead minimise the initial allocation and focus their efforts on replenishing to improve forecasts, which give increasingly accurate predictions of demand, based on actual performance.
Move to demand-led retail
"Forecasting is … different to planning. … We use a lot of methods to give … effective forecasts so that the inventory can be replaced quickly in the right places."
Listen to Dave Sheekey, Business Development Director for Aptos, on how forecasting differs from planning. You can also view the full webinar: Making the Bottom Line with Forecasting, Allocation and Replenishment, where Dave dives into how to choose a forecasting engine. He explains why it should be: • Trustable rather than a black box • Sensitive to many factors • Multi-use beyond replenishment • 'Smart' in its use of statistical algorithms and self-learning
audio is :47 long
Dig deeper into forecasting
8
A conservative initial allocation (push), followed by monitoring and forecasting of actual demand (pull), followed by demand-led replenishment (push).
Dig deeper into demand-led replenishment
Demand-led retail is push-pull-push
This means it is: • Automated and easy to manage • Forward-looking through reliable forecasting • Efficiently tied into a single inventory pool • Flexible enough to handle store-to-store stock movement if necessary
In the webinar Making the Bottom Line with Forecasting, Allocation and Replenishment, Nick Thompson, Solutions Consultant, Aptos and Dave Sheekey, Business Development Director, Aptos, delve into how to replace traditional fire-and-forget allocation with the demand-led approach that makes replenishment fire-and-forget instead.
9
Successfully combining single-pool inventory and order management with demand-led forecasting and replenishment is the key to reaping the rewards of the 'allocate less, replenish more' strategy:
The benefits
"[So] replenishment decisions are targeted at sales opportunities first. This will reduce markdown and increase sales and sell-through. This small change in approach, using a forecast rather than a plan, can have a powerful, short-term, and micro-level of impact on the business."
Learn more about the benefits and how to achieve them
Listen to Dave Sheekey, Business Development Director, Aptos, on how 'allocate less, replenish more' leads to these results.
audio is 1:09 long
10
• More full-price sell-through, fewer markdowns • Happier customers.
Naturally your omnichannel journey can't stop at allocation and replenishment. Demand-led operations ultimately call for a move to demand-led merchandise and assortment planning — which has knock-on effects for every part of your business.
Step 3: Widen the focus to planning
11
12
How do you shift your planning focus from product-centric (what you intend to sell) to customer-centric (what your customers want to buy)?
Demand-led planning:
13
It's a shift with both cultural and process implications, calling for greater cross-business:
• Integration and collaboration • Agility
Integration and collaboration
To succeed with demand-led planning you need 'downstream' knowledge of your markets and customers to properly inform 'upstream' planning-related activities. Cross-enterprise analytics is critical here. As Nick Leeper, Director Product Management for Aptos, says:
"I always say it's all just data — until you do something with it. Then it becomes something very valuable."
Watch the webinar Analytics in Planning, where Nick explores how retail businesses can evolve from being passive gatherers of data to active consumers and users of data for effective business planning.
To succeed with demand-led planning you need to be able to quickly adapt plans to 'chase' demand trends as they develop. This requires a level of comfort with 'planning for the unexpected', and a focus on: Product lifecycle management: Bringing product design, development, sourcing, procurement, quality control and sustainability management into the 21st century. Supply chain management: Extending integration, visibility and control beyond your business to interactions with vendors and other partners.
Agility
Towards greater integration and collaboration
Towards greater agility
15
About Aptos
Aptos is the largest provider of enterprise software focused exclusively on retail. Our cloud-based Singular Retail™ solutions are trusted by over 1,000 retail brands in 55 countries. With industry-leading omni-channel commerce and merchandise lifecycle management solutions, we help retailers develop dynamic and responsive assortments, streamline operations and deliver integrated, seamless experiences…wherever shoppers choose to engage. More than 1,300 colleagues share our collective passion for engaging customers differently, and we are committed to developing relationships built on trust and tangible value by partnering with our clients to create agile retail enterprises that are built to thrive in an era of constant change.
Engaging Customers Differently
aptos.com
