Inventory Intelligence: Cornerstone to Omnichannel Retailing

Omnichannel retailing adds the flexibility of cross-channel and mobile shopping to the unique revenue- and loyalty-building capabilities of the face-to-face retail experience. It also offers opportunities to build deeper shopper relationships — or risks ending them, when availability promises go unmet.

Integrated inventory intelligence is essential to deliver on the promises made to today's savvy consumers. 

Retailers who succeed at integrating their inventory intelligence for shoppers, associates and managers can cut costs, accelerate turns and build revenue by driving high-fidelity information back into the supply chain, aligning it with shopper demand. Retailers who fail will subject omnichannel shoppers to a fragmented retail landscape, marked by jarring, disconnected changes and unreliable information.

One retailer's journey to greater inventory intelligence
Recognizing the opportunity, forward-thinking leaders at one of the most renowned names in American retailing recently launched an ambitious omnichannel initiative to maximize inventory, selection and buying opportunities available to their shoppers. As part of this initiative, all stores were equipped with radio frequency identification (RFID) technology in order to provide accurate, real-time, item-level inventory visibility for all tagged merchandise across the stores and DCs.

With significant improvements needed to succeed in this effort, the retailer was looking to RFID to help vastly improve its item-level inventory accuracy and address key challenges including:

• Erroneous corporate stock ledger
• Inventory accuracy erosion
• Out-of-stock conditions
• Poor inventory visibility across locations
• Direct and indirect business benefits

But what can retailers expect to gain from investments in inventory intelligence? First and foremost, they will have the framework to implement omnichannel retailing with confidence — opening shopping to omnipresent online and mobile environments, while retaining a focus on the store. They can also expect direct and indirect business benefits in the areas of cost reduction, inventory management and revenue growth.

Workforce management
Inventory intelligence helps improve labor utilization, productivity and morale in stores and distribution centers through automation, accuracy and upscaling job responsibilities. It cuts the time spent on manual entry and inventory counts, and the time wasted following — and then correcting — information that is either wrong or insufficiently detailed for its intended use. 

Accurate inventory, allocation and replenishment information reduces pre-emptive buying and the inevitable markdowns and write-offs that follow from carrying too much stock. And an automated system that offers top-to-bottom visibility cuts losses from internal shrink fast.

Inventory management
Fast processes and lean inventories improve inventory turns, and reliable tracking of items and store locations helps stores reorganize their stock to maximize floor-space utilization and sales per square foot. More accurate forecasting, ordering, allocation, and replenishment intelligence helps stores tune their product portfolios, and make better use of fixtures, displays and other capital assets. 

Data-based collaboration with supply-chain partners raises compliance with order cycles and delivery requirements, and opens opportunities for closed-loop end-to-end collaboration, for example in tag reclamation programs.

Revenue growth
The real benefit from omnichannel retailing is revenue growth from:

• Fewer abandoned orders due to out-of-stock events
• Higher loyalty from more rewarding shopper-associate interactions and in-store experiences
• Greater merchandising potential, using clienteling and customer relationship management (CRM) information from in-store, online and mobile channels
• High-quality inventory intelligence collected from stores in real time feeds back through the entire supply chain, harnessing its efficiencies in the service of shoppers' demand.

Retail ROI
With the initial deployment, the retailer tagged 30 percent of the company's SKUs, representing approximately $8 billion worth of inventory. The deployment consisted of handheld RFID readers for store personnel to use in back rooms and on the sales floor for conducting inventory counts, replenishment and store receiving. As a result of its pilot program, the retailer was able to achieve significant benefits including:

• Greater inventory accuracy – inventory counts and transactions are now more accurate and consistent across the corporate stock ledger and perpetual inventory, providing reliable available to-promise inventory in support of the omni-channel retail initiative. Overall inventory accuracy rose to a sustained 95 percent in RFID- supported categories — up from pretest levels of 70 percent to 75 percent
• Faster and more accurate cycle counts — efficient regular inventory counts now replace the arduous annual physical counts, allowing associates to focus on shoppers rather than tasks, and enable accurate real-time inventory visibility
• Improved stock positions – with accurate inventory insights, actual merchandise assortments are in line with shopper demand and out-of-stock conditions are greatly reduced
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• Increased margin and revenue – pilot stores' sales, margin and stock turns improved across highly replenished categories
• Enhanced shrink visibility – item-level RFID helps the company uncover and address previously undetected sources of shrink and identify selling-floor losses in hours instead of months
• Increased customer satisfaction and loyalty – accurate inventory visibility ensures that the right product is available at the right place, at the right time for in-store and omni-channel shoppers

Inventory intelligence is a fundamental component of modern retailing — not only to support omnichannel initiatives, but also to assure availability on store shelves or for shipping, building shopper satisfaction and financial performance. Inventory intelligence aligns the supply chain to demand and helps retailers keep the promises they make to online, mobile and in-store shoppers. It coordinates information up and down their organizations and back along complex supply chains. 

Flexible solutions, when properly deployed, can help retailers seize new opportunities, avoid predictable risks and prepare themselves for a future that combines shop-from-anywhere convenience with an enhanced shopper experience centered at the retail store. 

Nancy Chisholm is vice president & GM for Tyco Retail Solutions.