Getting it right
Written by Hannah Prevett
Hannah Prevett takes a look at inventory control and replenishment in an omnichannel world
Clothing retailer American Apparel is a trailblazer. Not simply due to its outlandish marketing campaigns or the very public ousting of founder Dov Charney earlier this year, but because of its innovative use of RFID to improve inventory control. A successful pilot of this technology to help with inventory-related challenges in 2011 was extended to all new stores from 2012. American Apparel’s VP of technology Stacey Shulman said that prior to implementation, internal theft and process issues accounted for 60 per cent of stock shrinkage. Post roll-out, every item is measured and accounted for. Within this new culture of accountability, she has said, employees treat stock more respectfully and as a result the retailer has seen a reduction in both staff thefts and process errors.
Simon Clarke, supply chain and IT director at Enotria Winecellars and former group logistics and IT director at clothing retailer group Faconnable, says RFID is the only real solution for retailers struggling with multi-channel operations. “It’s possible to have a much greater degree of control over inventory if you use things like RFID,” he says. “In a multi-channel world, you need to see where your stock is. You need to make sure you’ve got accurate inventory and can divert stock down the right channels but also so you can publish on the website an accurate inventory."
Mark Lewis, CTO at Practicology, an e-commerce consultancy firm, agrees that the proliferation of retail channels has left retailers with a crippling headache. “The biggest challenge is the rise of multi-channel and the fact that location has become a much more dynamic concept,” he explains.
“Order management systems increasingly try to make intelligent decisions about where is the most effective location to ship the item from. The first iteration of that might simply be where is the closest stock to the customer but the next level of sophistication above that is it doesn’t just take in the closest but it takes in other factors such as the rate of sale at different locations,” continues Lewis. “For instance, you might have the available stock in one location but you’d be taking the last item from that store that’s been selling it very well whereas a few miles away there’s another stock that hasn’t been selling it and is sitting on a pile of them.”
Henry Morland, head of product at Brightpearl, the retail software company, says customers expect retailers to have a good handle on the stock they have and where it is available. “There was a time when you could walk to the shelf and have a look to see if you have it in stock, but as the sales channels have proliferated it’s much more difficult to know what you have in stock and therefore whether you can sell it."
Back to you
Another challenge faced by retailers, particularly those in the clothing business, is returns. Cheap or free postage on orders (and returns) has led to a surge in customers ordering more than one item when placing an order, adds Morland. “When buying clothes online, people will buy one size up, one size down and the size they expect to be because they’re not in-store trying them on. Returns have stopped being the exception – they’ve become part of the retail process,” he says.
“If you’re sitting at the other end of that and receiving all this stock back, the efficiency of that process is really crucial. If it takes a long time and it’s difficult to handle exceptions that’s a real drag on what you can sell,” adds Morland.
The Brightpearl cloud solution helps take some of this pain away by flagging the stock that can go straight back on to the shelf or other items that may need to be returned to the manufacturer. “We’ve got a simple system whereby you can quarantine the item so essentially put it on a shelf to be checked before it goes back into stock, or it can go straight back into stock or you can write it off entirely,” explains Morland.
Clifton Vaughan, co-founder and director of Natural Baby Shower, a multi-channel retailer of natural baby products, found that, as his business grew, he needed to develop a more sophisticated approach to inventory management. “We’d go to the shelf and what we were looking for just wouldn’t be there. We also couldn’t keep track of returns or stock coming in and it would often just be lots of human error where staff wouldn’t bring the stock in on that day, or they’d get sidetracked and forget to add ten onto the website,” he says.
Getting stock levels wrong can have dire consequences for the business, says Vaughan. “It can cost you customers and it can also cost you the time of your staff,” he explains. “If we come in on a Monday morning and we’ve got loads of orders to pack out, if you’ve not got your inventory right you’ll have to go back to people and say, ‘sorry, this wasn’t available; it’ll be available in three days time’. Some customers don’t mind it; some leave you and want their money back straight away."
Having implemented a cloud solution, Vaughan can see at a glance if orders are ready to be shipped. “Brightpearl gives you a green tick if it’s all allocated and ready to go out it’s ticked. I love it when we see all green ticks on a Monday morning.”
On the customer service point, Clarke says inventory control and management becomes all the more important if retailers undertake targeted marketing initiatives. “You can get to a stage where if you’re really clever on your data and you know somebody’s been searching your website the previous day there’s no reason why you can’t send a marketing email to that person as they walk close to one of your stores to say, ‘hey, you were looking at this last night. We’ve got it in this store, why don’t you come and look and we’ll give you five per cent off,” explains Clarke.
“But you can only do that if you’ve got an accurate view of your stock. If you send out a targeted marketing campaign saying, ‘hey, come and buy this product,’ and it’s not there customers are going to get really cheesed off,” he adds.
Lewis says that customers are expecting more from retailers, thanks to the increasing availability of services such as same-day delivery. “Unfortunately, in today’s world, benchmarks keep ratcheting up. So if you offer something to customers and their first thought is, ‘isn’t that fantastic’, if you get it wrong you annoy them more than if you hadn’t offered it in the first place. So if you’re going to offer an item or a service you’d better get it right.”