In omnichannel and ecommerce companies, inventory management, including tracking and reserving inventory for orders, is crucial for maximizing sales and improving customer satisfaction. If you can’t give customers accurate product availability, status, immediate delivery and store pickup, you’ll probably lose the sale and the relationship.
Inventory management systems and processes are dispersed throughout the business. It’s also difficult to analyze how to improve accuracy and timeliness. Without a total replacement, how can you incrementally improve systems and processes?
We will outline a 6-step process for assessing your inventory systems and developing an action plan for improvement.
Make the project team company-wide including:
Assess how the inventory management processes and systems can be improved in terms of accuracy, timeliness and higher order fill rates to maximize sales and customer service. To achieve this look at all these systems and supporting processes including:
Start out collecting metrics that give you a picture of inventory accuracy. Data sets include order fill rates, formal inventory results company-wide (shrinkage and overage) and assessment of store-level and DC accuracy of on-hand data at the SKU level.
Read "Managing Inventory: What Are Your Inventory Metrics Telling You?"
Include interviews with team members regarding the metrics and processes to identify where to look for the problem areas. A few of the major problems we see in consulting with ecommerce and omnichannel companies:
One of the most effective things you can do is create flow diagrams and high-level documentation illustrating current inventory processes. Because of the interaction of systems and processes, these diagrams can help isolate where potential data flow problems and timing differences arise. Create both current state and future state illustrations. Use a documentation or collaboration tool to create diagrams and corresponding descriptions.
Often in inventory environments there is a master inventory file and one or more inventory subsystems with different functions. For example, an inventory file may be passed every 10 minutes to an ecommerce site. This would be considered a “slave” to the master item file. You will find other inventory-related files for special functions. All of these need to be understood in the discovery process.
One of the key things to understand is, are there processes that temporarily hold inventory for an order? When is inventory allocated to an order? When is inventory on hand actually decremented from the inventory files?
One of the overall objectives is to create a single version of the truth. In older systems that are not truly integrated, you may find different data values for key items such as SKU sales and on-hand, on order.
Batch-based environments in older systems need to be eliminated if possible with online processes that improve inventory timeliness and visibility (e.g. arriving SKU inventory to DCs and stores or returns processed).
Every company’s assessment will be different. It’s important to prioritize the changes and estimate the effort and benefits. Low-hanging fruit is important. However, there are often changes that have to be made first in order to implement the most critical updates.
While these assessments require a lot of effort across departments, improved inventory management, including higher accuracy and availability, are critical to improving both sales and the customer experience while remaining competitive.