In my last blog I looked at Endless Aisle for a customer experience perspective. This time, I’d like to concentrate on what retailers must do to make Endless Aisle happen – effective inventory management. This is an area that the sector has struggled with for many years and the omnichannel demands of customers are raising the stakes. How should a retail company respond?
Endless Aisle combines offline and online channels to ensure that an item is never out of stock. The retailer makes its entire catalogue available in store so the customer is always able to order it. The item is then sourced from another store, distribution center or supplier and deliver to the store or direct to the customer. Get it right and the results can be impressive. For example, UK retailer, Debenhams, reported Endless Aisle led to £10 million in sales that would have otherwise been lost to understocking.
The need for effective inventory management
Endless Aisle is not easy to pull off for retailers. Just explaining the fulfillment process highlights the difficulties. The customer can order any item in store and, if it isn’t physically there, the retailer needs to seamlessly locate the item and deliver it quickly. The item may be at another store, at one of the distribution centers or with the supplier. The order has to placed, accepted and fulfilled in a way that’s invisible to the customers.
A recent Forrester report showed that retailers believe that inventory levels have to be 98% accurate for this to happen. And, that’s some distance from where most retailers find themselves today. Data accuracy and integrity are key. I think a single example will suffice here. One study at a large retailer revealed that 65% of their 375,000 inventory records were incorrect. That is an incredible 243,750 errors. Errors within inventory records can be hugely damaging as the system can think there’s inventory on the shelf when there isn’t.
In fact, the lack of real visibility into inventory within their supply chains has dogged retailers for years. Retailers have been faced with an expensive and unholy trinity: inaccurate view of inventory, too many stock-outs of fast-moving products and too much inventory of slow-moving products within the supply chain. All these things are happening at once. It’s a perfect storm that Endless Aisle only exacerbates. Research from RSR shows that retailers saw inaccurate inventory levels as the key challenge within their supply chains.
The retailers surveyed stated that working with suppliers on Endless Aisle as their major business issue but also noted that a lack of confidence in inventory accuracy was the key stumbling block to supply chain improvements. Furthermore, there was a general acceptance that the way retailers managed their supply chains in the past were not suited to the new omnichannel trading environment.
Omnichannel requires real-time supply chain visibility
Endless Aisle demands that the retailer is aware of inventory levels across all sales channels. Companies must have a clear understanding of what inventory is in their supply chain – including suppliers – and where it exactly it is. All inventory levels have to be immediately updated as soon as an order is placed. Customers have to be kept informed when they can expect delivery – a challenge when the retailer is relying on its suppliers to fulfill that order.
Indeed, the relationship between retailer and supplier has to be much tighter. Endless Aisle means working with suppliers in a way that vendors are accurately invoiced for items ordered, at the cost you expected, and track that the items were actually shipped to the customer. The retailer is likely to employ a three way match involving the vendor’s invoice for the order, the purchase order by the retailer, and the receiving report by the retailer. This process helps avoid discrepancies in these documents that might lead to overspending or paying for items that weren’t ordered. There are, of course, numerous other supply chain documents – such as ASNs – that have to be exchanged and processed quickly and efficiently.
For inventory to be tracked and updated across all channels, all orders must be managed in real time from a centralized location.
Real-time inventory requires a central platform
The old retail fall back of simply throwing more inventory at the problem is not going to work for Endless Aisle. Instead, companies have to become much smarter within their supply chains in order to provide a complete service that is profitable and satisfies the customer. I see three real challenges to achieving this.
The first, as I stated earlier, is data integrity. Endless Aisle demands not only the real time exchange of supply chain documents – orders, POs, ASNs, etc. – but that the data within those documents is accurate and error-free. An error in an ASN can cost $100 or more so multiple errors soon become extremely costly. A trading partner community will have many different systems, document types, standards and communications protocols all of which have to be accommodated if the fast and secure exchange of accurate documents is to be achieved. Today, global B2B Integration platforms allow retailers to quickly connect to customers and suppliers throughout the world to exchange core business documents
The second challenge revolves around data availability. Information on inventory doesn’t reside within a single system. It requires real-time connectivity between various enterprise applications – ERP, store inventory management, warehouse management, etc. – to allow the flow of information across the supply chain. This requires connectivity with the inventory systems of suppliers and customers. Again, a B2B Integration platform will offer seamless integration into a wide range of back-end systems. Trading Grid, OpenText’s B2B platform, can act as a ‘firewall’ ensuring data accuracy and quarantining inaccurate information before it enters other applications.
Finally, inventory is not the only aspect of the supply chain where retailers need a clear understanding of performance. With Endless Aisle, it is essential to understand the performance of the overall supply chain and the suppliers within it. Retailers need to know which suppliers deliver most ‘perfect orders’, deliver on time and many other KPIs. Supply chain analytics enables the creation of visual dashboards and reports that business users can access anywhere to gain real time visibility into supply chain activities.
The great news is all the technology needed to deliver the real time inventory management capabilities needed for Endless Aisle is available today. It doesn’t require retailers ‘rip and replace’ their current systems. It means deploying a B2B Integration platform capable of quickly and securely scaling to meet the needs of the retailer’s trading partner community.