The Parker Avery Group recently published a point of view, “Essential Disruption: Store Level Omnichannel Capabilities for Retail’s New World,” in which inventory expert, Rob Oglesby discusses key tenets retailers must embrace to deliver exceptional omnichannel experiences in our disrupted world, focusing on store fulfillment and BOPIS success.  In this week’s blog, we provide an excerpt of this publication, focusing on one of the most critical capabilities any retailer must possess: inventory accuracy.

Two Critical Inventory Changes for BOPIS Success

Stores are notorious for inaccurate inventory. There are plenty of legitimate reasons—and just as many “self inflicted” reasons as well.  The inventory accuracy issue must be addressed to drive long-term success in a store-based fulfillment program like buy online, pick up in store (BOPIS). 

Your customers are relying on your ability to follow through when you accept their orders to purchase products. They are looking to take the “risk” out of the trip to the store for items they want or need, as well as being able to potentially shorten the shopping experience if they are in a time crunch or have safety concerns. Customers assume that your acceptance of the order means it will be fulfilled.

If your inventory is not accurate, you face customer disappointment and eroded trust when you must notify a shopper that their order cannot be fulfilled—especially if this notification occurs after they think they’ve successfully completed the transaction. Further, the longer the time period between order placement and the notification, the more frustrated the customer. If this type of event occurs repeatedly, you may not only lose a customer wishing to transact this way, you might lose them for good.

All modern BOPIS systems include logic to protect from this problem, and it essentially works like safety stock. Once the perpetual inventory in a store drops to a pre-determined value (usually set up by category using velocity and other characteristics), the system prevents a customer from placing an order for that item by showing “out of stock” or “zero quantity available.” That’s certainly the right policy, because inventory—even very accurate inventory—is always in flux while the store is open for business. It’s important to account for the fact that customers shopping the store may have collected the very item you are presenting to customers online, making it impossible for the associate tasked with picking the item, even moments later, from successfully securing it.

The more inaccurate your inventory, the more risky it becomes to expose it, and the greater the buffer you have to configure, which limits your ability to present items to customers shopping online. Further, the smaller the assortment, the less compelling the transaction becomes for the customer—meaning, if too many items fall below the “pick up today” threshold, a retailer risks customer abandonment.

Inventory accuracy is a constant battle. While stores will perform a physical inventory on an annual basis (a critical “true-up” process to establish a clean baseline), typical day-today activities erode that accuracy.  There are two critical inventory changes the organization needs to address to increase the success rate of BOPIS:

Start Clean. Before a store goes “live” with BOPIS, conduct a complete physical inventory. This ensures the system has the most accurate version of inventory available to begin the new operation.

Maintain. This is a lot more complicated, and it really requires a deeper look at the inventory-related business processes currently performed in the store. Here are a few to review (and potentially adjust) before you go live with store-based fulfillment:

  • Cycle Counts. In theory, cycle counting is a great way to keep store inventory accurate. The challenge in a store is the fact that product may not all be where you think it is. Some might be in the back room, a good portion will ideally be on the “home” shelf, but if you are also featuring the product on an end cap, in a display, or in another part of the store, some might be missed in a count. While this process has the best intentions, it may actually lead to less accurate inventory if executed without precision. Review this practice, if it is in place, and consider adjustments if you notice significant change transactions in stores with otherwise good shrink number.
  • Quantity Key Scanning at POS. This is typically an issue with grocery and other high-velocity retailers when a customer buys several varieties of the same product and the cashier scans one then counts the balance and indicates a sale of that many units of the initial item they scanned. While this won’t necessarily lead to financial shrink, it absolutely leads to inaccurate inventory on a SKU basis. This issue has plagued replenishment for years, and now it impacts your new omnichannel program. While it may seem more efficient, that perceived efficiency comes at a cost. If this is a practice in your store (especially in the categories you intend to include in your omnichannel program), consider additional guardrails around the process to ensure the front end team uses it judiciously.
  • Shrink. Obviously theft and damages are challenges every retailer faces to varying degrees depending on merchandising practices. This is not an easy problem to address. It requires diligence within the leadership team of each store and is best managed through shelf maintenance. The more orderly the store is kept, the easier it is to spot anomalies in the inventory. Messy stores are usually magnets for shrink in all forms, and there is a direct correlation between shrink levels and inventory accuracy. Address the shrink challenge with focused leadership. If the store cannot be maintained, it is not a good candidate for an omnichannel program.

Cover image by 15299 from Pixabay

Published On: July 23, 2020Categories: BOPIS, Inventory, Omnichannel, Omnichannel Maturity, Rob Oglesby, Store Operations