Inventory Management in Digital Supply Chain

Inventory plays a significant role in supply chain. Traditionally, Inventory management has been a back-end planning function and largely managed through spreadsheet formulas modeled by supply chain planners. Supply managers are well versed with concept like Economic Order Quantity(EOQ), Cycle Inventory, Demand and lead time uncertainty, Safety Stock and inventory holding cost. They are the Guru of concepts like periodic review vs continuous review and deterministic model vs probabilistic model. Few more advanced formulations like risk-pooling and bullwhip effect can also be incorporated while doing the inventory planning. These concepts are well known as far as ordering pattern is considered to keep the working capital at minimum as a main objective but this is no longer enough!

Conventional way of looking at inventory has transformed rapidly in last few years with the evolution of digital era. Inventory management process is closely knitted now with technology and is being managed as core component of it in any supply chain.

Offerings like “order-anywhere and collect anywhere”, Same day Home-Delivery, Fast track collection have gain momentum like never before and each of these digital pushes have made inventory management challenging and technology driven in an unprecedented manner.

Digital Disruption in Supply Chain

One large Australian Grocery retailer is facing acute challenges in coping up with demand placed through digital channels and segregating it from the stores sales. At present, huge order cancellations are being forced wherein customers turn up in stores to collect their order while someone else has walked away buying the item from stores. There is no way of identifying an inventory in the store or DC whether is belongs to an online sale or has to be fulfilled at stores.

UK based omni channel retailer has implemented seamless integration between its Warehouse Management system (WMS) – which is master of inventory, Order Management System (OMS) and order taking channels (Ecommerce, Apps and stores). But increasing occurrences of both under-promising and over-promising orders has perplexed firm’s supply planners as they are unable to decipher where exactly the problem lies if any.

Single View of Stock

Above two examples provide a glimpse of how inventory management has become a key function of technical landscape. Showing correct inventory picture to customers is key to success in today’s world where buying pattern is driven by exact availability of items. In-store sales are largely dependent on response of stock availability done by customers beforehand. Wrong picture of stock being thrown at customer repeatedly is suicidal in today’s world where customer has got visibility of item at other retailer which might be few hundred meters away.

One of the most important aspect of inventory is viewing it as same item available for purchase across channels. And making sure that back-end systems are able to differentiate a stock which might be physically available in DC or Store but has got allocated to a customer order.

Other Challenges

Most of the retailers across globe are in business for at least half a century and have build their ow customized legacy applications for Point of Sale (POS) and Warehouse Management System (WMS). With the invent of digital channels, important layers are being added between POS and WMS to manage the customer order properly. This demands more integration elements to be developed adding complexity to manage it without issues.

In this era of promotional selling, key events like Black-Friday sale, Cyber-Monday, Back to School and Thanksgiving draws humongous crowd on digital platforms where selling usually starts at stroke of midnight. Millions of people hit on the website simultaneously looking for best deals. It is imperative that Technical systems would be able to not only cope up with such kind of hits, but also make sure that orders placed should be fulfilled means inventory picture should be accurate. With millions of enquiry happening at the same time with at least thousand for single Hot-selling item, it is obvious that one or the other failure of technical components might end up in chaos and frustration for customers.

Technology Plays a Key Role

Building this kind of inventory management system calls for robust technology back-end and flawless integration between different systems. Its quintessential for companies to pay due diligence while deigning their technical architecture which takes care of flow of inventory information. In order to keep customer expectation intact, it is essential that inventory picture should be accurate and reconciliation between different systems should also be happening in a synchronous way.

While there are ways to address these challenges, the growing need of digital selling has made it mandatory for organizations to look at their inventory management process more from visibility to customer point of view.

Our consultant at Milk-Run have experience to work with many clients in Europe and US where they have helped organizations defining processes to streamline inventory management and optimization.

Please write to us at bd@milk-run.co.in or visit our website to know more on how we can help you with you inventory management requirements.

Milk-Run Consulting

https://milk-run.co.in