In today's retail scenario, inventory optimization has become vital to a company's survival. Inventory optimization is essential for ensuring the right inventory is placed at the right location, at the right time to meet service-level goals across different points of sales. If you don't have strong inventory control, you're going to lose sales and lower earnings sooner or later.
With increasing competition among brands and retailers to fulfill customer requirements in the fastest possible time, optimizing inventory allocation in stores is becoming increasingly important to boost sales. This article discusses the need for inventory optimization and best practices that brands can adapt to, to ensure sustainable and profitable retailing.
Why is There a Need for Optimizing Inventory Allocation?
Accurate inventory management refers to having the right styles, in the right quantity, in the right location, at the right time, and at an optimum price. To achieve this, we must consider the contingencies for rising demand and supply disparities. It is critical to have firsthand knowledge of the number of items in-store and know how much is required to fulfill the evolving demand.
Maintaining proper inventory levels is essential, else, a company will lose sales, experience lower ROI, and reduce profitability. One of the most efficient methods for retailers to limit unnecessary expenses and boost operational efficiency is to use an intelligent algorithm-driven inventory optimization approach and leverage the power of innovative software solutions to maximize brand potential.
How can Inventory Allocation be Optimized?
1. Keeping Track of Inventory Audits
Cross-referencing financial documents with inventory details is the technique of inventory auditing. When auditing inventory, you should concentrate on gaining sufficient confidence in all audit statements, with a particular emphasis on completeness, accuracy, and valuation. Moreover, inventory holding costs should be regularly evaluated to prevent discrepancies and variations.
Advanced inventory management solutions reduce the need for regular auditing by automatically updating inventory in real-time and maintaining inventory accuracy across all sales channels at all times. This helps increase inventory turn-around time, and minimize the complexity of demand analysis and pre-season or in-season planning.
2. Integrating an Inventory Management Tech solution
The market is swamped with inventory management solutions, making it tough for brands to choose the most suited option. Brands need to analyze their requirements carefully and then choose a Merchandising solution that digitizes the inventory management process and automates reordering and replenishment to ensure no loss in sales. Increff Merchandising Solutions is one such solution that uses intelligent algorithms to analyze historical sales data to establish the best inventory planning, buying, and distribution strategies for maximum store performance with minimum manual efforts.
Increff Merchandising Solution reduces operating costs by smartly analyzing demand patterns to increase sales, profitability, and regional demand fulfillment to maximize brand potential. They have demonstrated excellence in allocation optimization strategies by rendering difficulties for a number of global retailers and brands like PUMA, Adidas, Vero Moda, Celio, Jack & Jones, Tommy Hilfiger, Calvin Klein, etc.
One of Denmark's leading fashion, clothing, and accessories brands, Bestseller operating 500+ retail outlets and selling in multiple retail formats, was experiencing difficulty in analyzing individual store demand, leading to imprecise inventory distribution. Using Increff Merchandising Solution, Allocation & Replenishment, it was able to boost retail sales significantly. If you wish to enjoy the same benefits, Increff is the most acceptable solution for all of your inventory management challenges.
3. Accurate Demand Forecasting
Demand forecasting allows retailers and brands to understand the existing demand better and estimate the upcoming trends early on to ensure they are fulfilled in time. This enables them to manage inventory appropriately and guarantee that stores always have the right stock in the right quantity and at the right location. Inadequate demand assessment leads to inaccurate stock management, excess production, wastage, and heavy monetary losses.
Analyzing past sales data gives insights into sales patterns and helps in predicting future trends. As a result of guaranteeing the proper quantity of stock at all times, your inventory turnover time will improve, and carrying costs will reduce.
4. Assortment Planning
The process of choosing which styles and sizes will be sold within a specific period of time is known as assortment planning. Given the high stakes in addressing true customer demand, it is critical to conduct optimal assortment planning to ensure the balance is perfect between demand and available stock at all times.
Accurate assortment planning involves granular data analysis taking into account multiple size and style-level variables and it's critical to develop a thorough approach to guide you through this complicated process. Increff's smart merchandising system helps with assortment planning by analyzing sales patterns, revenue, discounts, size cuts, and stock-outs of style vs size combination, at an individual store level for precise decision-making.
5. On-Time Replenishment
Maintaining the correct mix of inventory and demand fulfillment across points of sale is crucial for accurate retail inventory management. Working on spreadsheets results in erroneous demand sensing, inaccurate inventory monitoring, mismanagement, and a loss of sales prospects, leading to a negative brand reputation and market relevance.
Auto-replenishment, a feature of new-age merchandising solutions, allows merchandisers the flexibility to no longer keep track of stock and allow automation in decision-making. Brands can set auto-alerts based on existing sales and merchandise lead time (manufacturing and delivery of the item to the store) to ensure stock availability.
Increff Allocation and Replenishment solution assists merchandisers and retailers in identifying bestsellers (NOOS Never-Out-Of-Stock styles) and setting auto alerts to notify when a style should be reordered to avoid sales loss.
Conclusion
Planning for the right pre-season inventory and optimizing the allocation of the in-hand stock during the season is very essential. Adaptive learning, predictive and prescriptive analytics are some of the most appropriate inventory optimization options. Without a disciplined approach towards inventory optimization and robust analytics, getting the right stock for maximizing sales is complex.
All of the above optimization approaches are valuable assets for inventory management that will undoubtedly benefit your company. It's also worth noting that all of these approaches need a uniform approach to data collection and interpretation. This approach may be made significantly easier by using a new-age merchandising technology solution.
