5 Obstacles in Inventory Replenishment that Disrupt Retail Sales

Inventory replenishment: Can you see the future of retail?

Inventory replenishment is the essence of your bottom line. It is the critical link in your supply chain that everyone needs to review and tighten.

You don’t need a crystal ball to utilize the principles of demand forecasting and inventory replenishment. But, you do need a crystal-clear game plan to ensure that you can deliver today what the customer dreamed about the night before.

The Customer is Always Right; is Your Inventory?

The customer expectation of ‘I can dream it one night, and get it the next day’ is a dramatic shift for the retailer. This shift of expectations is forcing a better response from retailers. The customer wants it now, for the right price, and with a smile.

And just to underscore the implications of responding to this consumer demand, several presentations at Retail’s Big Show in January, discussed mastering the balancing act of maintaining a high level of service without overspending on inventory.

Common Inventory Replenishment Obstacles Include:

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1. Demand Forecast Accuracy

2. Vendor Restrictions

  1. Lead Time
  2. Minimum to ship
  3. Pick Size
  4. Date to Place Order
  5. Lead Time to DC
  6. Lead Time DC to Store
  7. Vendor Lead Time Direct to Store or Customer
  8. Lead Times for Cross Dock & Flow Through

3. Order Cycle

  1. How much to buy calculated with one of the two methodologies
  2. Top Down Plan (push)
  3. Bottom Up Service (pull)

4. Vendor AND Retailer visibility of:

  1. Current Inventory
  2. Pipeline (On hand, On Order, In Transit, Waiting to Ship)

5. Promotions, Events, Seasonal and/or Market Reaction

Modern Markets Require Smart Inventory Replenishment

Measuring and analyzing all of these pieces to optimize the amount of inventory to purchase and then build the purchase order takes a great deal of computing power. Suffice it to say, if your software is over 5 years old, it is managing some of these pieces well (maybe?), and some not at all. If you are using Excel for inventory replenishment, stop. Also, how old is your data, and can your inventory replenishment system respond quickly, even multiple times in the same day? Only recent hardware technology changes have made it economical to calculate all of these into a profit optimized replenishment order.

If your replenishment system is older than your desktop, it is time to replace your replenishment system. Otherwise, why did you replace your desktop?

Inventory Replenishment Response Times

The goal is to master demand forecasting and inventory replenishment so that your business can react immediately with the most desirable product. Responding faster than the competition gives you the edge that puts you foremost in the consumer’s mind when it comes to which exit to take on the freeway. When you can consistently deliver the product that the consumer wants at the time they need to have the product; you can carve out a big slice of the current retail market.

Demand Forecast is Knowing before Customers Ask

You have to know what the customer wants before they decide which store to go to for the purchase. And you have to stay on point, so that they think of you first the next time they shop. It’s a little bit like being able to see the future, which is the essence of modern retail.

Start Asking the Right Inventory Questions

Inventory Replenishment is something every business needs to improve. Inventory Replenishment is the link in your supply chain that is often skipped over on review. The reality is when you tighten the inventory replenishment link, you move yourself well ahead of most of your competition. Review your demand forecasting and inventory replenishment tools. How accurate is your demand forecast? What is your service attained and GMROI in each product class? Ask yourself is it time to ‘Tighten the Links In Your Chain’™?

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