In an omnichannel environment, store inventory must be precisely organized and managed to meet customer expectations, no matter what purchase platform they use, as well as to drive labor efficiencies.
Rob explained, “Inventory accuracy at the location level is the foundation for this paradigm shift. While it will never be perfect, inventory accuracy is the building block for omnichannel execution. And it must be not just a total number at the store level but distinct locations within the store: backroom, “home” locations, end caps, etc. Accuracy and visibility at this detail provide a reliable number for each SKU so the right action can be taken.”
Rob continued, “A functioning omnichannel store requires a level of precision that most retailers seem reluctant to address as it requires a rethink of how perpetual inventory works and why a move to location-based inventory is needed. In today’s model, once a product arrives at the store, most retailers can know they have X number of units of a particular item but don’t necessarily know where it is. They understand the net quantity they have on hand but leave it at that. This approach to inventory management no longer aligns with the purchasing behavior of today’s customers, and it’s just not good enough anymore.”
Here is where technology is playing a critical role. As Les explained, “We’ve shifted away from the concept of perpetual inventory, a model used by most big retailers. Continuous accurate counts are now required, and that can only be realized with a transition to location-based inventory that separates inventory count levels to identify what’s on the sales floor, what’s in the backroom, and what’s committed in the supply chain, yet to be received. Most important is the determination of true demand, for digital and in-store purchases, within each product’s delivery cycle to the store. It is in these areas that Impulse Logic is applying ML to determine not just where the stock is, but where it should be, and in what quantities. Today, very few retailers can accurately expose and use such intelligence in support of omnichannel availability within the local store. Without this knowledge, it is impossible to achieve accurate supply planning in balance with demand.”
Rob added, “This is absolutely a key aspect of it. The other critical part is its impact on the retailers’ cycle count. Without understanding how much of a product you have and where it is stored, you will mess up your perpetual inventory. If a retailer thinks they have 100 units in store but can only find 25 in a location, they will make an adjustment to replenish, leading to an unnecessary overstock of certain products. The winners are going to be those companies that break this paradigm.”
It is essential to know the precise physical location of products for optimal fulfillment, whether retail or digital. While critical to inventory accuracy, this precision also drives better supply chain reactions to store assortment adjustments in response to more accurate demand intelligence. Too often, poor inventory accuracy at the store sees an oversupply of products, as well as a failure to deliver the right products. Most retailers also include a buffer to ensure inventory is available to accommodate digital purchases while considering in-store shopper behaviors. This balance of demand and availability has a complicated relationship. To have local store control of inventory available for demand, the store must have an ‘always accurate’ view of inventory on the sales floor, in the backroom, and an aggregate of the sum of both.