Imagine you’re at a store and you absolutely love a certain shirt. You search through the different sizes and you can’t seem to find your size. Psychologically, this may turn you away from the shirt and cause you to leave the store. This is the inventory management business challenge wholesalers and retailers deal with on a week by week basis. Missing out on sales opportunities by not properly managing inventory impacts the business and the image a customer may have about the company.
On the flip side, a wholesaler/retailer does not want excess inventory. Businesses will be burdened with the costs associated with carrying extra inventory, which could lead to liquidating surplus inventory. So how do retailers/wholesalers balance between too much and too little? What metrics can they use to plan accordingly? What is proper planning? Let’s dive into three best practices for Inventory Management.
1. Daily Sales Reporting
Building up a framework and reporting data at a daily level is extremely helpful for two reasons: historical results and weekly trends. Last Year (LY) and Last Last Year (2LY) helps retailers/wholesalers plan accordingly based on prior year trends. Another reason for daily sales reporting is being able to set up like styles/style colors for forecasting. Having historical trends of styles allows retailers/wholesalers to be able to more accurately identify sales opportunities.
Examples of using a like style is a drop and replace style to replace one of the existing styles in the assortment. Daily sales reporting not only includes your brick-and-mortar buildings and outlets but should also include your eCommerce business. In the modern age, eCommerce business has grown substantially proper reporting can lead to better forecasting/budgeting for inventory management.
2. High-level Planning
Using the daily sales reporting, we recommend using high-level planning by year/season (whichever makes the most sense for your business). Planning by season offers users a better ability to plan more effectively. We can use this planning at a higher level to push down to a more granular level that is needed for the inventory planning for retailers/wholesalers.
By simplifying your budgeting process (read this blog on 3 Ideas for Simplified Planning), this allows users to input data easily and can use spreading from different software’s like IBM Planning Analytics, Workday’s Adaptive Insights, or Oracle PBCS to do the work for the users. With a reference point like weeks per month, we can accurately spread data and provide better insight to inventory needs for the company.
3. Location/Branch Planning
Granularity in this situation is critical for accurate planning. Planning by location, by the week level offers great visibility into what stores have for inventory. Then, pair with high level planning to spread to the weekly level allows companies to plan accordingly to make sure they don’t miss out on potential sales opportunities. One feature of IBM Planning Analytics is the offering of different types of spreading at a consolidated level. Users do not have to be entering in at the lowest level.
Don’t miss out on any more sales opportunities
Are you tired of missing out on sales or want to reduce your inventory costs? The examples above are just three ways to help your company improve inventory management.
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EBOOK: RETAIL ASSORTMENT PLANNING OPTIMIZATION