Ask any small to mid-sized retailer the biggest risk center of daily operations and you’re likely to hear an answer that involves inventory. It’s where errors are costly, frustrate customers and affect entire business models.
Compounding that, errors in inventory are not only common but time-consuming to track down and correct. And let’s be honest: Managing inventory integrity is not how most managers would like to spend their days. It’s tedious, labor intensive, and yes, boring.
Retailers that enjoy significant sales through ecommerce face an even larger challenge managing fulfillment because sales come from both physical and virtual channels. Convergence of inventory for these channels in a single system removes the burden of managing completely disparate inventories. However, fulfillment from orders originating from different channels still relies on human action; that can result in inventory levels showing stock-outs in one channel and surpluses in another. Even though all inventory is visible in a single software solution, the actual management of it is still largely dependent on employees, which opens the door to human error.
The same technology that helped converge inventory levels has evolved and is now actually able to automate inventory management and fulfillment. By removing reliance on employees to track inventory, this makes mistakes less likely and allows order fulfillment from any location to orders on any channel. Thus omnichannel fulfillment is enabled, providing higher service levels to customers, more streamlined inventory management for retailers, and less stock tied up in expensive warehouses. Many retailers find that they are able to eliminate warehouses entirely and have retail locations function as mini-distribution centers.
Algorithms built into retail management software instantly execute sales orders based on parameters set by retailers to fulfill merchandise from optimal locations. This “best store logic” can be used to solve inventory and service concerns of any kind. The most typical example is when someone places an online order the automated system locates the SKU physically closest to that customer for fulfillment. This ensures the fastest possible transit time and lowest shipping cost. It can literally be the difference between an overnight and a four-day delivery, with no additional shipping fees.
But retailers don’t have to prioritize distance on the rules that govern automated fulfillment; they can set the software to satisfy any business need. If a particular SKU is not selling well in certain regions, web orders can be fulfilled from those locations to reduce inventory. Best store logic also easily prioritizes fulfillment. Thus if the best fulfillment center is out of stock or an employee notifies the system that the inventory levels show in the system are incorrect, the algorithm automatically reroutes affected orders to the next best location.
Whether sales orders originate from company websites, Amazon, or the telephone, best store logic ensures that fulfillment is optimized to occur from whatever location best serves the goal dictated by the retailer. This directly leads to better sell-through, higher customer satisfaction and reduced inventory carrying costs. Much like ecommerce itself, best store logic is quickly evolving from a “nice to have” to a capability that can help retailers meet rising customer expectations.
Ian Goldman is president and CEO of Celerant Technology