Taking the Guessing Out of Inventory Management

By Allan Pulga

No more squinting through the mind-numbing rows and columns of inventory spreadsheets. The future is automatic.

In an effort to reduce out-of-stocks problems, most U.S. retailers have implemented, or will soon implement, an automated inventory management system.

A new report from Aberdeen research firm, entitled “Mid-Size Retailers Must Address Their Out of Stock Demons,” found that 80 per cent of retailers surveyed will be using automated planning and replenishment systems by March 2008. The preponderance for automation signals a new era in retail inventory management – no more spreadsheet checking and balancing.

Retailers consider out-of-stocks problems their biggest inventory challenge, the report notes, because they typically result in lost sales revenue.

Mid-size retailers are able to provide increased merchandise turn but it shouldn’t be at the expense of on-shelf availability, writes Gregory Belkin, the author of the study.

“The solution to this challenge lies with changing business processes to support the implementation of advanced planning and replenishment systems,” adds Belkin. “These solutions can help a company create a more balanced inventory position… without creating holes on display shelves or selling racks.”

According to a previous Aberdeen study, three quarters of all retailers agreed that lost sales and customer dissatisfaction caused by out-of-stocks problems are top business challenges. Other pressures include:

• Supply cycle is longer than demand cycle
• In-store stock imbalances that drive too many merchandise transfers
• Markdowns to drive sell-through is eroding gross margin
• ‘Lumpy’ receipt patterns that put excess cost into the retail supply chain

Automated planning and replenishment systems take all the manual legwork out of attending to the above inventory challenges.

Match supply and demand cycles based on annual sales trends, all stored in the system. Keep everything stocked so no customer is left without. Sell stock before you need to markdown surplus product. Eliminate the so-called ‘lumpy’ receipt patterns.

And since it’s all done automatically, within the system, retailers are free to worry about other things… like actually selling product, instead of wondering if it’s still available on the shelf.