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January 11, 2023

Overcoming Inventory Management Challenges
for Retailers in 2023

Author mahender
Category Uncategorized |
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The cornerstone of your retail business is – Getting your products to your customers on time!

How can you achieve it?

Simple – By staying on top of your inventory and managing it efficiently. It helps you meet demand, offer an excellent shopping experience, and multiply sales.

What are the key inventory-related challenges retailers face today?

1. Imbalanced and Excess Inventory

2. Unpredictable consumer spending

3. High expediting expense chasing evasive supply and shifting inventory to alternate warehouses

4. Fail to offer a good customer experience

5. Poor sales and reduced customer loyalty

5. Poor sales and reduced customer loyalty

7. Slackening top-line revenue

How can retailers overcome inventory management challenges to improve customer experience and maximize margins?

1. timize Inventory and Improve Allocation

Whatever the market scenario, it’s vital for every retailer to bring the right products to the right stores or channels at the right time when potential customers want to buy – while maximizing profit simultaneously.

It’s a sentiment identified by retail giants, with 80% of retail executives sharing the opinion that customers prioritize stock availability over brand loyalty.

Optimization inventory management improves customer loyalty and enables you to minimize working capital by cutting down unwanted inventory delays and safety stock. Other cost reductions are enjoyed by optimizing inventory – a notable drop in overstocks, backorders, and stockouts. When supported by AI and machine learning, this further augments service levels and delivery cycles.

Smart inventory allocation, constant in-season planning, and on-order visibility help retailers increase sales in spite of stock and supplier bottlenecks like delayed and canceled orders. In addition, enhanced allocation helps in cost savings, offering a proven method to maintain profit margins during inflation without hiking prices and missing sales.

2. Real-Time Inventory Visibility is Key

Real-time inventory visibility ensures that retailers can classify fast and slow-moving products and manage their orders accordingly. The real-time data can be leveraged for creating promotional strategies – excess inventory can be offered in promotions, ensuring discounted products are available for purchase. Furthermore, the analytics reported from inventory visibility empowers retailers to make strategic decisions and respond swiftly to dynamic market changes.

On the other hand, real-time inventory visibility greatly benefits shoppers. In 2021, Google searches for the term “in-stock” have increased by a whopping 800%, inkling that the need to display available inventory is greater than ever. In addition, 60% of Gen Z customers habitually check in-store availability online before purchasing physically. Moreover, one-in-four buyers avoid visiting physical stores when they aren’t sure if a product is in stock. Therefore, real-time inventory is imperative to offer a good customer experience.

3. Evaluate and Adjust Pricing Strategy

In spite of the fears of consumers spending less based on increased prices in inflation, 58% of senior retail executives believe inflation can be an opportunity to improve profit margins by controlling pricing power. To have a command over the price, you need an effective pricing strategy.

How should the pricing strategy be during inflation?

  • Create a structured and targeted pricing strategy – Building a pricing strategy based on a deep understanding of customers and products can result in overall volume growth, better customer retention, and higher actual price realization.
  • Communicate effectively – During inflation, communication is key when dealing with inventory disruptions from your customers to your suppliers. Retailers need to strengthen pricing management with effective communication externally and internally. Emphasize product value across the channels, arm the sales teams with accurate data and analytics, demonstrate consumer-centric thinking, and showcase product-specific attributes and price points.

4. Leverage AI-powered demand forecast and Automation

Uncertainty is inevitable in retail inventory management. Most retailers are well aware of the fact that healthy inventory begins with reliable forecasting. However, predicting the future accurately is impossible, the pandemic being the best example. Therefore, planning the best you can for the unknown is vital.

Today, with the help of AI-powered demand forecast tools, uncertainties can be predicted more accurately. This digitally-powered forecast provides all the potential probabilities and outcomes that might occur while managing inventory. Consequently, the odds of your demand forecast being accurate rise exponentially.

According to market experts, applying AI-driven demand forecasting to your inventory management can reduce errors by 20-50%. This further minimizes the number of lost sales and product unavailability by up to near about 65%. The more inventory disruptions retailers face, the more imperative it is to leverage the latest technologies.

What’s more, an automated inventory management system contributes extensively to retail business digitalization, resulting in increased efficiency, enhanced system accuracy, better real-time tracking, and early problem detection. Automation through integrated eCommerce can take an advanced inventory planning system to the next level by achieving the optimal inventory mix and allocating where it will sell for the highest profit margin.

5. Stock auditing and Preventive Control

Regular stock auditing processes, such as daily cycle counting, minimize human errors and provide more accurate, updated inventory information for effective cash flow management. To achieve more accurate financial data, retailers must organize audits by category and cycle count smaller inventory samples.

Another method to overcome inventory management challenges is implementing preventive stock control systems to manage problematic inventory, such as fragile equipment, perishable items or obsolete materials. Retailers must perform regular preventive maintenance on equipment and machinery stock if needed by the manufacturer. Furthermore, to monitor shelf life and prevent waste, you must catalog data on problem stock location, quantity, and cost. Last but not least, retailers must track supplier data, such as defective or damaged products, shipment errors, and missed delivery appointments, to maintain a good customer experience.

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