Multiple supply chain shocks following the onset of COVID-19 have forced retailers to diversify their supply chains, improve brand resilience, and boost operational efficiency. Many are also trying to improve their inventory management practices, considering that:
- Out-of-stock inventory situations cost retailers more than $1 trillion annually
- Businesses lose $1.75 trillion annually due to the costs associated with inventory mismanagement (overstocks, preventable returns, etc.)
- Inventory holding costs represent more than 25% of total unit costs
These problems only increase when retailers start selling on multiple channels. For all these reasons, they need to improve their multichannel inventory management capabilities. While this can be challenging, it’s not impossible – with the right processes, technology, and software.
What is Multichannel Inventory Management?
Multichannel inventory management is about effectively managing inventory stored in various locations and sold across multiple sales channels. These include:
- The retailer’s eCommerce store
- eCommerce marketplaces, e.g., Amazon or eBay
- Brick-and-mortar stores
- B2B channels
- Virtual storefronts on social selling channels like Facebook Shop or Instagram
Multichannel inventory management is critical to ensure that the right number of products are in stock to meet demand. It also enables retailers to deliver an enhanced shopping experience to customers, maintain operational efficiency, and improve profitability across all channels.
Key Strategies to Improve Multichannel Inventory Management, Allocation, and Control
Multichannel inventory management is one of the biggest challenges in B2C eCommerce. The good news is that eCommerce retailers can improve their capabilities with the help of the right IMS software (see below) and by following these proven strategies:
1. Define Core and Non-Core Products
For most online retailers with a broad product portfolio, a few “core” products contribute to the bulk of sales. Identifying these products and individually managing them enables retailers to maintain the optimum stock to meet customer demand and avoid losing out on predictable potential revenues.
2. Identify and Define KPIs for Multichannel Inventory Management
Identifying relevant Key Performance Indicators can go a long way towards streamlining multichannel inventory management. KPIs make it easier to leverage the right kinds of data to improve visibility, track inventory, improve demand forecasting, and identify gaps.
Some important KPIs that online retailers should track include:
- Inventory turnover
- Gross margin percent
- Customer order fill rate
- Average days to sell inventory
- Cost of carrying
3. Reserve Inventory for Each Channel
Retailers can allocate inventory for specific channels and adjust this inventory up or down depending on each channel’s popularity with customers. So, if the total inventory is 100, and a quantity of 40 is reserved for Amazon, the remaining channels (physical store, social selling, etc.) will receive only 60 units. As more orders come in from Amazon, the quantity there will be reduced. When it gets depleted, the inventory will then be reduced from the regular inventory.
It’s also important to showcase the inventory across these channels to ensure that customers know what’s available and where. With multichannel inventory management software, it’s also possible to automatically direct customers to other available channels if the inventory for one channel is not available. This ensures continuous demand fulfillment and ensures that customer experiences are not affected.
4. Distribute Inventory by Warehouse
Retailers can also distribute inventory by warehouse or fulfillment center. This method ensures that whenever an order is placed, the distribution center that’s closest to that customer will automatically fulfill the order. It thus speeds up order fulfillment and reduces shipping costs. It also ensures that the risk of delivery exceptions (e.g., bad weather, riots, natural disasters, etc.) is spread across multiple locations to reduce the probability – and costs – of non-fulfillment.
5. Dynamically Manage Inventory in Real-Time
Dynamic inventory management enables retailers to detect stock-outs and overstocks in real-time. Apart from that, with automated inventory and order management, they can quickly respond to issues and:
- Reduce shortages
- Anticipate demand
- Adjust sales projections
- Improve inventory turns
- Maximize inventory profitability
The Need for Multi-channel Inventory Management Software
It’s hard enough to keep track of inventory that’s only sold on a single platform. It’s even harder when more channels are added to the sales ecosystem. In this situation, old-fashioned manual or spreadsheet-based inventory management systems (IMS) – which 55% of eCommerce businesses still use – are inadequate.
If anything, such legacy systems:
- Hamper inventory visibility across relevant channels
- Result in inaccurate demand forecasts
- Deter multichannel fulfillment
- Hinder order management and third-party logistics (3PL) management
- Increase the risk of customer dissatisfaction due to delivery delays and cancellations
To avoid such issues, centralized and automated IMS is not only desirable but essential.
Key Advantages of Multichannel Inventory Management Software
The best multichannel IMS solutions provide real-time visibility from a centralized location, so retailers can easily sync inventory and fulfill orders across channels – without the risks and costs of under- or over-stocking.
They can also:
- Control costs by reducing excess inventory and backorders
- Create better and more consistent customer experiences across every channel
- Improve planning and forecasting
- Capitalize on new sales opportunities
- Improve delivery times
- Increase sales and boost profits
Technology also enables companies to better track their inventory turnover ratio, so they can achieve the right inventory balance, identify out-of-stock patterns, and improve restocking decisions. They can leverage demand modeling and forecasting capabilities to accurately forecast demand, scale inventory up or down – and even add or remove channels – to match changes in demand.
The best multichannel inventory management solutions integrate an order management system (OMS) to streamline inventory management and order fulfillment. Plus, retailers receive automated backorder notifications and real-time replenishment reports so they can easily fulfill multi channel orders.
Optimize Multichannel Inventory Management Using Sapours RetailCX
Sapours, via customizable RetailCX solution, empowers retailers to streamline their multichannel inventory management with powerful SAP Customer Activity Repository (CAR) and SAP Commerce Cloud.
With our Quick Deployment Framework (QDF), retailers can build a unified CX across multiple channels while gaining faster time-to-value for their eCommerce implementations.
To know more about our offerings, schedule a free consultation with our team.