Inventory optimisation is changing the way businesses are running their warehouses and managing their inventory stock. It’s allowing them to become more competitive in the market and see advantages on a global scale.
Focusing on inventory optimisation allows companies to free up working capital without substantially changing the service levels. It aims to match supply to demand in the most efficient way possible. Companies are moving beyond the “binge and purge” inventory philosophy. They used to over-buy their inventory stock. If demand didn’t match their inventory stock levels, they’d discard it at the end of a season. Seems awfully wasteful and expensive.
So, if you run a multichannel business, managing inventory across multiple platforms can leave you with a feeling of great responsibility when trying to match supply to demand. If your business is expanding to more and more channels, you’ll need to adapt to new supply chain processes, delivery methods and return processes. Here are a few of the barriers that business owners often run into with inventory management and some tips to work toward for optimisation.
Using separate supply chains
Many brick-and-mortar retail stores have added an online eCommerce platform to their business. However, many retailers have kept inventory management systems separate. When these processes don’t communicate, there is a lack of visibility and transparency between the channels; the supply chain processes get muddled. There are many steps in the supply chain such as forecasting, replenishment and warehouse allocation, just to name a few. If you miss a supply chain step, you’ll run the risk of delayed goods or customers trying to buy inventory that’s out of stock. It’s important to streamline your supply chain processes and get software that communicates across channels.
Getting safety stock levels just right
Safety stock is a strategic buffer and can help companies stay on top of sales in the face of stock-outs. However, safety stock inventory can chew through capital and leave companies over-prepared with decreased capital. If the safety stock doesn’t get used and it is seasonal, you’ll often see it on the clearance rack or bundled with other products at a significant discount.
Trying to find the right amount of safety stock to have can be challenging. However, if you can fine tune and reduce this number after looking at previous supply and demand patterns, you will benefit from a more optimal, reduced level.
Perfecting return policies and logistics
Customers who buy products online are three times more likely to return it than if they bought the product at a brick-and-mortar store. You need to have a return policy that lets customers who bought online, return in store or send back through a courier. However, you’ll need to have the staff and infrastructure to manage the returns process of the excess goods in a retail store.
To streamline your return process, make it easy to pack and ship the item back. If customers can do this simply, it will make it their life and your life easier back at the depot. Also, consider bringing on a third-party logistics company. These specialists can help look after and make your inventory management process make optimisation a more efficient beast.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.