3 Inventory Management Keys To Improve Product Allocation
As stores begin to offer more ways to fulfill product demand, strong inventory management will be vital to meeting customer expectations.
Consider how this applies to product allocation in relation to in-store pickup or ship-to-store fulfillment. When retailers start offering these services to fulfill customer demand, their stores could have a difficult time keeping inventory on the shelf or planning inventory replenishment. How can retailers determine what additional demand these services will place on a store’s inventory?
Here are three factors to consider with regard to demand planning and product allocation.
Factor in seasonality: Stocking up on seasonal and holiday-specific products can complicate demand planning and product allocation. You can begin by making assumptions based on previous data. For example, if you are selling Christmas trees, you might determine that the number of trees ordered online last year will be about the same this year.
This year, however, perhaps you have offered your customers the ability to pick the tree up in one of your brick-and-mortar stores. Now you have some decisions to make on your process. You could shift some inventory from the central warehouse to the stores using your projection of what will be picked up where. Or you could create a process where the item to be picked up is immediately shipped from the warehouse to the store, and the customer in notified when it is available to pick up.
As with many retail logistical decisions, the best decision depends on your customers’ expectations and your willingness to meet those expectations. After the first year of providing this service, you will at least have some historical data for next year to plan your stocking allocations.
Determine in-store pickup for product staples: Maybe you start offering online ordering with in-store pickup at the store pharmacy, in which case you now have customers that regularly order a specific amount of certain items every month. In this example, you are better able to determine a stable inventory projection.
But when starting out, product allocation will likely take some guesswork. When you start promoting in-store pickup, you may start off with one extra in-store pickup order the first month and build to five extra orders in the following months until the orders begin to stabilize. There’s no magic answer to determine how many replenishment cycles you will go through before in-store pickup demand stabilizes. But you can look ahead to seasonal trends and use effective advertising to help determine the likelihood of growth.
Select which locations should offer in-store pickup: It actually might be harder for larger stores with a variety of products to fulfill in-store pickup. A location that usually doesn’t stock as much variety might be in a better position to fill in-store pickup orders. Why? That location has specific “bread-and-butter items,” which are always in stock, giving you a better chance of satisfying regular customers. You might find it most convenient to offer in-store or ship-to-store fulfillment at stores near your distribution centers.
Ship-to-store may have a little more latitude compared to in-store pickup. With pickup at the store, the customer is going to come to that location and expect the product to be there. With ship-to-store, a distribution center can mail the item to a specific local store, ensuring product availability.
Here’s the bottom line: The key to determining inventory management for in-store pickup or ship-to-store product allocation depends on your store’s e-commerce software. It should know at any given point in time how many of each product is in a specific store and when a product is purchased online, then the software should alert the store team to remove that stock from the shelves and have it ready for pickup.