Is your inventory visibility good enough for today’s omnichannel retail?
Inventory visibility has always been important in retail. But with the proliferation of touchpoints and channels – both online and in-store – retailers now need to see a real-time view of all their inventory, right now.
If you don’t know the quantity of an item, where it is located, its current price nor status, you can’t offer the ‘buy anywhere, fulfil anywhere’ options that are best for customers and most profitable for you.
With the average retail inventory accuracy at a low 63%, that can mean problems with a whopping 2 in 5 orders. And as the customer journey continues to evolve to meet changing consumer demands, providing a seamless omnichannel experience will only get more difficult.
The challenge of inventory visibility
After the stock shortages of 2020 and 2021, many retailers have spent the past year or more cleaning up excess inventory as steep inflation forced consumers to cut their spending.
While understocks lead to the opportunity cost of lost sales and dissatisfied customers, overstocks came with the financial costs of storage and financing. Excess inventory also ties up working capital, results in markdowns that can hurt your margins and, perhaps most importantly, means the loss of new products and innovations that can give you a competitive edge.
Without a real-time view of inventory, retailers are virtually guaranteed to interrupt the flow of an omnichannel shopping journey.
Overselling can occur when products ordered online are not in stock. That results in cancelled orders, fewer sales and frustrated customers.
Underselling happens when safety stock levels have been set too high to protect customers from cancelled orders, or when buffers are put on inventory to make it available for click-and-collect. But taking an item off the website when you really have it available elsewhere means you’re disappointing customers and missing sales.
Rejected orders can result when online orders are routed to a fulfilment location that doesn’t hold the items and the order must be rerouted to a new location. This results in delayed deliveries and more unhappy customers.
These challenges affect a customer’s confidence in your omnichannel offering and drive new shopping behaviours. Customers don’t just use click-and-collect because it’s convenient - they’re using it to ensure the inventory indicated online as in stock will definitely be there when they walk into the store.
And poor inventory visibility doesn’t just result in botched sales and increased costs. Store and call centre employees have to deal with all the problems that rise, including upset customers, misplaced products and inaccuracies across different systems. That means inventory inconsistencies not only churn customers – they also churn staff.
What causes inaccurate inventory data?
The problem with inventory visibility is typically down to four underlying challenges:
Using ERP or in-house systems to manage inventory
Retailers often use ERP systems and homegrown software which aren’t built to provide accurate, real-time inventory data. ERP systems are designed to process financial transactions but can’t handle the volume and speed of stock availability checks from digital sales channels. Nor were they designed to consume updates from point-of-sale systems in near real-time. Many retailers end up pouring money and resources into fixing problems that didn’t need to happen in the first place.
Connecting legacy systems
Enterprise retailers have to spin up new channels and touchpoints as customers demand them. But legacy or outdated systems weren’t designed to send and receive real-time data. Delayed or incomplete product availability and pricing across various channels results in inaccuracies, and means the data is always stale.
Integrating data silos
Retailers use multiple customer-facing and back-office systems, spanning POS, pricing & promotions, order management, fulfilment, inventory management, mobile apps, ecommerce, loyalty, CRM, finance, marketing and more. Often loosely connected with manual processes and custom integrations, these omnichannel solutions are fragile, inefficient and costly to maintain. When data isn’t centralised, retailers can only access rudimentary sales, stock, pricing and promotions data and can’t build unified views of their customers.
Resorting to quick fixes, not long-term innovation
When problems emerge with inventory visibility, some retailers resort to quick fixes and point solutions to get capabilities up-and-running, instead of tackling the underlying problems with existing systems. And by diverting resources and budget into short-term solutions, they neglect to create the innovations that can differentiate the CX.
3 steps to take towards real-time inventory
When the cost overruns outweigh the expected gains – higher customer satisfaction, increased revenue and better margins - it’s time to invest in new technology and process improvements.
A unified commerce platform will provide an accurate, real-time view of all your inventory and customer data across stores, DCs and digital channels. This means you can quickly see where inventory is and therefore the fastest place to fulfil from. You’ll improve inventory accuracy, reduce stock requirements, minimise fulfilment costs and get products to customers faster. And you’ll increase sales by using ranging and fulfilment capabilities that enable you to sell products across channels (and even sell products not normally stocked within any channels).
There are three steps to take as you start the process of solving inventory pain points:
1. Plan your journey over the next decade
Your investment in a new retail system that meets your inventory visibility needs is a significant undertaking with huge returns that requires a strong business case. That means starting with a vision for the business in 5-10 years from now.
Assess where you can improve and expand your traditional products and services, and where you can launch into new market segments or introduce new business lines. Plan how the business model will be disrupted and the new skills and capabilities you will need to compete with unfamiliar competitors.
Use these insights to develop a deep understanding of customers and their shopping preferences and figure out what you need from a new retail system to create that single view of customers and inventory for a truly unified CX.
2. Bridge the gap between stores and back office
Customer today expect a harmonised shopping experience for every shopping journey. That means your stores, departments, systems and channels can’t run in parallel to each other. The entire organisation must align on the value of a seamless customer experience.
To get your stores and enterprise on the same page, form a cross-functional team representing various departments and stakeholders across the business. Consult these key individuals about their needs and pain points and agree clear goals for the transition, such as reducing stockouts, improving data accuracy or enhancing order fulfilment.
3. Get the CFO’s buy-in . . . and allocate budget
Your CFO can be the most important stakeholder in the move to a new solution. Getting their buy-in and endorsement means assessing how the investment helps to deliver cost savings and real value over its entire lifespan.
Create a budget by calculating how much the system will cost in terms of licenses, implementation, training and maintenance. Then compare these costs to the benefits you expect to see from an accurate enterprise-wide view of inventory, including tangible and intangible returns, such as cost savings, increased revenue, improved decision-making, enhanced scalability or competitive advantage.
A cost-benefit analysis should show with absolute clarity how a new system can deliver a positive ROI.
Want help to achieve deliver a successful omnichannel CX?
If you’re struggling with inventory accuracy and are looking at how to build a foundation for a seamless customer experiences, talk to us about how to start with a real-time view of inventory.
For more on how a move to a unified commerce strategy gives you the flexibility and agility you need to keep in step with consumers’ changing needs, download our new ebook:
