Flexibility with inventory is key to maximizing sales in today’s economy, but a variety of challenges prevent multichannel businesses with direct fulfillment centers and retail stores from maximizing the inventory they have. For instance, e-commerce, catalog and retail have different planning methods, and different accuracy issues; it’s one thing to get the size distribution right for a region and store, and another to plan for the way colors sell. Many e-commerce sites will not take an order if the fulfillment center is out of stock or on back order, giving customers the erroneous impression that the item isn’t available from your company—even though it may be available in stores. And even if it is available, it may not be in a store nearby. If you’re a retail company, you don’t want inventory riding around on trucks between stores or back to the fulfillment center to fill direct orders. At the same time, if you’re a store manager, you don’t want direct orders to strip your inventory of best selling items if you don’t get credit for the sale. All the channels—retail, web, catalog or wholesale—compete for best sellers.
The majority of companies we consult with on inventory management projects are taking a very conservative approach for this year’s Fall and Holiday seasons; they will pass up sales rather than be significantly overstocked. Do you really want to “lose the sale” because an item is not available for direct order fulfillment, or you can’t get it conveniently to your customer?
Potential Solutions
Here are some ideas you can consider for achieving channel synergy, with resulting improvements in fill rates, customer service, sales, and profitability.
- Develop a nimble inventory strategy; don’t let inventory get “frozen” in a channel.
- Determine who, in your merchandising or inventory control organization, will make decisions about inventory planning by channel; who will decide on purchases, planning assortments, etc.?
- Consider implementing customer remote order with store pick up.
- Improve merchandise planning by channel through an understanding of how items and categories sell differently.
- Get the marketing and merchandising planning forecasts in synch.
- Get merchandise demand projections and receipt plans in line with marketing’s weekly projections.
- Protect inventory availability for a channel until initial selling trends are apparent.
- Extend vendor product offerings and reduce inventory levels through vendor drop ship.
- Adopt retail store fulfillment of e-commerce or catalog customer orders.
Explore Filling Direct Orders From Stores
Your first priority should always be to have optimal inventory available in the fulfillment center; it’s the lowest cost way to serve the customer. However, when that fails, you’ll want to “save the sale”—and the idea of filling customer orders from retail stores isn’t anything new. What is new is the ability to automate store fill allocation of customer orders with a variety of user-defined business rules. Systems that do this are either batch or on-line integrated to the retailer’s merchandising systems, plus they place affordable systems in the stores for order fulfillment. Here are just a few examples of retailers that have implemented somewhat different solutions from two vendors.
- Jos A. Bank, with over 450 men’s apparel stores nationwide, were early adopters of cross-channel order processing from MICROS-Retail, a part of Columbia, MD-based MICROS Systems, Inc. Store associates have access to the inventory positions of other retail locations via MICROS-Retail’s Tradewind POS or to their direct commerce operation utilizing MICROS-Retail’s CWDirect Order Management System. As an example, store associates can place an order against direct commerce inventory and that order will seamlessly flow through the fulfillment process as if it came directly from the customer.
- Title Nine Sports is using MICROS-Retail’s Cross-channel Inventory Broker (Locate). Each company can identify inventory in alternative channels and have those items reserved against demand. Those orders will be shipped to the customers’ home, office or gift recipient or set aside at their appropriate retail location for store pick-up.
MICROS-Retail Locate’s Order Broker module has system controlled business rules that determine where a product can be picked and shipped from. Prior to Order Broker a user had to manage all the decisions. Order Broker has decision rules for checking to see if there is a PO that will come in within days, the location that has the most inventory, and stores which are not available for picking (for example, a new store).
- Jones Apparel Group, parent of an 800-store women’s apparel and shoe chain that includes Jones New York, Nine West, Anne Klein, Bandolino and Easy Spirit, has successfully installed VendorNet’s StoreNet system. In developing StoreNet, Sharon Gardner, founder and president of VendorNet (Delray Beach, FL), applied the systems concepts in her firm’s vendor drop ship software to fulfillment of direct orders from stores. Jones Apparel gives StoreNet rave reviews for maximizing e-commerce sales through store fulfillment without adverse effects on store operations and inventory.
- CompUSA is also live with StoreNet, initially in two pilot stores, and will have 50 stores on the system when complete.
The StoreNet order fulfillment process allocates orders and publishes them to stores based on user defined rules such as inventory availability, safety stock levels, proximity to the customer and store preference setting. At the store, a salesperson prints pick tickets for allocated orders. Inventory is picked from the store and staged for packing and shipment. Picked inventory quantities are confirmed in StoreNet, which produces packing slips and shipping labels for confirmed items. When a carrier picks up the package, a ship confirmation triggers an update to the order management system for billing to the customer.
At the heart of store fulfillment systems like these is a user controlled set of complex business rules taking into account saleable inventory quantities, safety stocks, overstocks, newly allocated orders, split shipment rules, proximity to the customer, and more.
What Are the Benefits?
We believe such “save-the-sale” concepts can create a marked increase in customer retention and satisfaction, and drive retailers’ top line revenue. They allow you to maximize e-commerce sales through expanded product selection (and size and color availability), impacting the growth rate of e-commerce sales compared to store revenues (less foot traffic, more click traffic). They increase your ability to reach new customers with store merchandise, while making you more efficient at selling down corporate-wide inventory—hopefully at full price. Efficiency is also increased through elimination of store-to-store calls and transfers, with reduced manual effort. Second package shipment costs are offset by closer proximity to the customer. With stores able to go on and off store fulfillment by the user defined business rules—rules that can also give credit to the store salesperson for filling the order—turf battles over inventory are lessened.
At a time when inventory is lean, this approach can maximize sales and customer satisfaction, with business rules that give you the flexibility you need.
