I needed two beers for a gift. I knew the fancy kind my friend likes, but I had no idea where to get them. Naturally, I let an Internet search engine make some suggestions. From the search results, I selected a major retailer with locations near me.
I found this retailer provides my favorite omnichannel capability: In-store pickup. The trouble was, they only had one beer available at the location closest to me. So I checked the second closest location. Still only one beer available for in-store pickup. As a distributed order management professional, I had a hunch that this retailer did indeed have many bottles on the shelf, but due to a lack of real-time available to promise inventory visibility (and safety stock restrictions), it showed only one beer available for purchase.
I decided to move through the purchasing process for one beer, and in the comments section wrote that I wanted two, if they happened to have it. And of course, they did. Shortly after I placed my order, I received a phone call from a store associate telling me that they had a lot of bottles on the shelf, was surprised the Internet claimed there was only one available for in-store pickup, and if I happened to want more than two he could pull those for me (Compliments to the store for empowering their associates with such engaging and efficient omnichannel customer service, but that is a topic for a different blog).
This consumer shopping experience is common: A retailer displays items with only one or two as available to purchase. However, when the shopper enters the store, they find many more of the item on the shelf. Why is there a disconnect?
In today’s age of information and immediacy, it is not good enough to display semi-accurate inventory availability. Real-time inventory visibility and accurate available to promise is a challenge that every retailer must overcome in order to provide a seamless shopping experience.
A SINGLE VERSION OF THE TRUTH
It’s very likely that my beverage retailer does what almost every other retailer does: It segments its inventory into different pools to satisfy different areas of order capture, and then adds restrictions and safety stocks. The amount displayed as available for pickup in-store is whatever the end number shakes out to be after all the allocations.
Splitting inventory has a myriad of issues. As every retailer segmenting inventory in this manner knows, there is a lot of maintenance and waste involved, as some channels are left with too much inventory and some with too little. The absolute worst scenario is when a retailer is completely out of stock and the only solution for the customer is to go to an entirely different retailer.
At the store level, companies typically only rely on educated inventory assumptions about what would sell best in which storefront. They are constantly balancing consumer satisfaction against the desire to move more products. When consumer behaviors are not accurately predicted, the common practice is to mark down inventory in stores, reducing the margin.
With these common challenges in mind, what is the best way to balance and manage inventory? Additionally, why is real-time inventory visibility essential and what are the specific benefits of accurate inventory to retailers, branded manufacturers and customers?