Understanding Omnichannel Inventory Dynamics

Jun 29, 2014 7:55 AM  By

inventory-baecode-scan-600One key to success in omnichannel commerce operations is accurate, real time, complete visibility of inventory at all stages of the supply chain. This translates into knowing what is on hand, what has been sold and what is in transit. Having immediate and accurate inventory data helps assure that fast moving items are always in stock and that appropriate levels of medium and slow moving items are always available, but not overstocked.

High inventory visibility allows retailers to find inventory sharing opportunities, a critical element of omnichannel commerce operations. “Seeing” inventory makes it easier to spot commonality in inventory and order profiles throughout the entire enterprise. This allows, for example, combining manufacturing, spare parts and distribution inventory, and, in the order picking area, combining ecommerce, retail and wholesale operations.

Inventory visibility tells a business which items move when, and how many move in a specific period, helping managers understand ordering preferences and requirements. This is important data. It helps optimize order routing while forecasting future inventory levels for seasonal stocking and helps schedule the appropriate level of labor to handle order fulfillment. Inventory visibility is also important in endless aisle operations. The seller’s inventory does not physically reside on the premises, but is stored at a manufacturer’s facility.

[ALSO: Optimizing Omnichannel Order Picking and Fulfillment Operations]

Inventory visibility has the effect of making the supply chain work to optimum efficiency, another critical element for omnichannel success. It helps the reduction of costs by maintaining “correct” inventory levels by indicating the velocity of specific SKUs and specific item quantity per order. Since customers have high expectations for item availability and selection, this helps improve service levels and overall customer satisfaction.

With this detailed inventory information at hand, create a model that optimizes your particular fulfillment operation. A practical way to do this is by charting functions vs. processes for each channel. Review all functions such as receiving, returns, replenishment and shipping.  List processes for each such as sortation, automatic document insertion and batch picking. Commonalities between channels will then become apparent. These commonalities can be exploited to optimize omnichannel commerce operations which may entail using the same picking, packing and shipping systems for multiple channels.

Warehouse management system (WMS) software, integrated with point-of-sale (POS) information, is the first step in gaining inventory visibility. When combined with inventory management and control software, your system will also improve pick productivity, throughput and accuracy.

[ALSO: Reducing the Cost of Order Fulfillment]

Individual online orders and store replenishment orders differ, often requiring different picking routines: slotting, inventory management and control software speeds and the “each” picking process while facilitating batch and wave picking. Slotting is the assignment of items to a particular location in a storage and retrieval system in order to maximize system capacity and improve picking efficiency. Slotting improves space utilization, reduces handling, increases productivity, improves inventory accuracy, and reduces mispicks.

Inventory management and control software also improves restocking accuracy, critical in handling customer returns in omnichannel commerce operations.

Ed Romaine is CMO – VP Marketing of Integrated Systems Design (ISD). https://plus.google.com/+EdRomaine