In the last two years, it seems that no issue has impacted retail more than supply chain disruptions. From delays related to the pandemic, materials shortages, and situations like the Suez Canal blockage, the retail industry has taken a hit across channels.
Here’s what retailers should know about the impact of supply chain disruptions on inventory management and new trends in omnichannel distribution strategy.
Supply Chain and Inventory Optimization Affect Omnichannel Retail
Inventory optimization through offering and sharing SKUs among channels leads to increased purchasing power, lower production costs and more favorable positioning with manufacturers. Business leaders of each channel must partner closely to forecast and monitor sales trends. This enables them to quickly make decisions, such as how and where to best allocate inventory to maximize sales and revenue. It is critical to understand which arm of the business can sell the inventory at the highest margin and to allocate inventory accordingly.
Risks, New Trends, and Challenges to Consider
Customer demand for a frictionless shopping experience continues to drive the need for integrated supply chains and the ability to browse, buy, and return merchandise across physical and digital channels.
One supply chain tactic that’s taking off is shipping directly from stores, decreasing the time it takes for orders to reach customers while also lowering cost through prioritizing inventory that’s held at a physical location. With shifts in order fulfillment due to the pandemic, the ship-from-store strategy grew 80% in 2020 and continues to rise.
In addition, retailers should pay attention to their market saturation, especially as wholesale channels continue to grow, threatening retailer market share. Other logistics and supply chain challenges to consider include the customer expectation for even faster delivery and increased demand for curbside pickup.
Demand Forecasting and Inventory Allocation to Meet Customer’s Omnichannel Expectations
Customers expect a shopping experience that aligns with their needs across digital and in-person channels. Channel managers should plan and allocate inventory to maximize customer satisfaction. One of the best ways to do this is by optimizing the forecasting strategy to minimize discrepancies between inventory and demand.
Forecasting should be done individually at each channel level and then added to estimate total demand across the business rather than creating a topline demand plan and trying to allocate it down to the channels. Each business unit should have a strong sense of its real sales potential so that only a small percentage of inventory shortages or overages is left to be allocated among the channels.
Aligning Supply Chain Planning with Omnichannel Retail
One of the most important aspects of inventory management is ensuring a seamless customer experience across channels through standardized product packaging. Omnichannel retailers should work to have inventory fluidity across each channel, ensuring that the merchandise is SKU’d, priced, and packaged identically. This allows inventory to be transferred with minimal cost or time disruptions while ensuring a consistent experience for the customer.
Best practices for Omnichannel Distribution Strategy
Since different channels often have different processes, it’s easy for disconnects to arise. Lack of alignment on strategy, pricing, and fulfillment tactics can lead to frustrated customers, wasted time, and missed profits.
To combat this, it’s important to take an adaptive, integrated approach to the supply chain. Developing a holistic omnichannel strategy and then creating channel-specific processes will likely be more effective than trying to fit competing channel strategies together. In addition, leaders should prioritize communication and optimization tactics to establish visibility and ensure all channels are synchronized.
Omnichannel Retail And Supply Chain Management Work Hand-in-hand
A comprehensive supply chain management strategy is crucial to the success of omnichannel retailers. Supply chain management provides a line of sight into important data such as inventory levels, order status, delivery times, and other key metrics. Now more than ever, prioritizing a dynamic, responsive distribution strategy that aligns with customer expectations is critical to reduce logistics costs and drive profits.