As we do comprehensive inventory management assessments, often the issue surfaces as to where the function should report? Traditionally, inventory planning, forecasting and management functions have reported to the Merchants. But products assortments and businesses became more complex and diversified management often asks should it report to Operations or Finance? The rationale is that the Merchants are often traveling and may not have the time to detail supervise the merchandising and inventory functions.
Finance may be able to give an analytical approach to controlling stocks. But I talked to an owner of a large multichannel company recently who admits Finance may put more pressure on managing inventory costs than the Merchants – but they may also run higher backorders as a result. This destroys customer service and adds $7 to $12 per backorder costs.
Reporting to Operations may be an option if the Merchant does not have time. They may take interest in quality and vendor compliance, which they understand well. But will they have the time to do a complete job of optimizing inventory?
Our opinion is that Inventory Management functions need to remain with Merchandising. There are many synergistic benefits that can only result with the Merchandising department managing this function. The Inventory Control or Rebuyers will be more apt to work in concert with the Merchant who selects the product; than with individuals from another department. Develop the total responsibilities (e.g. forecasting and planning, weekly forecasts, vendor compliance, reorders, purchase order management, item master file maintenance, monitoring price changes and sales, etc.) and decide if these are functions you want to split away from Merchandising?
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