Achieving the Best Retail Inventory Method

The definition of the best retail inventory method is at watershed moment in the history of global logistics. Where once a fairly simple model existed of locally or domestically sourced products came to market, or the more recent model of purchasing massive quantities through low-cost country sourcing, a new retail inventory method is emerging.

In a recent analysis by the Aberdeen Group, a clear model emerged among a group defined as "Best-in-Class" The retail inventory model that stands out ahead of the rest is Cross Channel Supply Chain Execution.

In plain English, Cross Channel Supply Chain Execution is leveraging the supply chain not just at the supplier and customer ends of the chain, but to also use multiple distribution centers, lateral stores, and multiple source buying to increase in-stocks, improve profit margins, and reduce logistic support overhead.

This is achieved through an efficient application of automation, cost to serve initiatives, improvements in direct to customer distribution, and leveraging of vendor relations in both the supply chain and in synergistic relationships with third party logistics services (3PL) and logistics service providers (LSP).

More companies are leveraging more service sources and more diverse delivery models to improve producer to customer delivery time SKU by SKU. In fact, the primary retail inventory method used to manage inventory levels is SKU rationalization. This is a method of evaluating both fast and slow moving inventory in terms of cost to provide each unit.

When demand is weighed against cost in this manner, supply chain managers can make sound decisions of what to carry, how much, and methods of delivery to the customer.

Accuracy and timeliness of both receipts and outbound of shipments, and year over year decrease in transportation costs were the three areas that Aberdeen Group identified as focus areas for organizations seeking to implement the best retail inventory method for cutting costs and improving service levels.

Full supply chain visibility is critical to the success of a cross-platform retail inventory method. Real-time data on the state of inbound freight, inventory control and inventory locator systems in peer or hub stores, and 3PL direct to customer shipping (drop ship) all play a role in operational success.

Full life-cycle, unit level visibility combined with flexible, multi-tiered logistics networks capable of lateral and tier-skip fulfillment defined the difference between the best, the average and the worst retail organizations.

Sources:

Heaney, Bob and Anand Sahir, "The State of Retail Logistics: Strengthening Cross-Channel Supply Chain Execution", Aberdeen Group, April 2010, http://v1.aberdeen.com/launch/report/benchmark/6351-RA-supply-chain-retail-logistics.asp

 

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