Consumers expect brands and distributors to respond quickly to individual demands and preferences. This is evidenced by the rise of “long tail marketing,” a revenue strategy in which sellers combine maximum product variety with optimum, omnichannel inventory management strategies for greatest possible sales. Why? Because for many consumer products, the market is so finely fragmented that it requires a vast holding of product (and delivery) variations to satisfy diverse market demands.
For suppliers, the need to balance supply with increasingly varied demand is now even more critical. Consumer brands, manufacturers, and distributors must optimize inventory levels to have the right type and amount of product in the right place at just the right time. All this must happen to maximize sales and hit revenue goals.
This is not easy, which is why we promote advanced-analytic inventory optimization technology as the key to maximum sales and profitability in modern supply chain management. In a nutshell, optimized inventory reduces stock-outs and lost sales, converts inventory to working capital, and helps ensure liquidity.
Following are a few ways retailers, manufacturers, and distributors can optimize inventory for better supply chain management.
Omnichannel Inventory Management Strategies
Many companies have yet to statistically optimize decisions around the channels through which they sell and deliver to customers. These sales and delivery channels include direct from manufacturer, retailer distribution, online, and in-store. Certain purchases might combine a number of sales and delivery options, such as when a customer places an order online and then chooses between mail delivery or in-store pick-up.
Many of our customers have used our software to optimize policies and decisions around selling (and delivering) vast arrays of SKUs to different customers from different stores and warehouses.
Most start with an investment in forecast automation and accuracy. They want a system that lets them forecast by customer, product line, SKU, or even distribution channel. From there, many also use the advanced modeling and simulation capabilities pre-built into their platform. In addition to channel management and optimization, these capabilities are essential to seasonal planning, market agility, sales growth, and profitability.
In sum, omnichannel inventory management strategies are not only a profitability tool, it is also a customer-centric scheme for orchestrating inventory for maximum responsiveness, service level, and sales.
To make sure you’re getting information from all relevant channels, you’ll need to integrate demand planning and supply planning for the necessary transparency and communication across the company. From an organizational structure perspective, your demand planning department must work closely with your sales team to gather the latest information from customers.
Your salespeople are your eyes and ears on the ground to help predict and forecast consumer trends. Likewise, both teams must also stay abreast of marketing plans. Will a newly planned promotional campaign spike demand next month? Will it cannibalize future sales?
Smart Trading Network for Efficient Fulfillment
For long tail sellers, it generally doesn’t make sense to rely on just one or two suppliers to fulfill demand nationally, internationally, or globally. By building a smart trading network, you can leverage the inventory that is closest to consumer demand so you can fulfill orders quickly, reduce shipping costs, and improve inventory visibility. Again, much of this is possible with automated, accurate forecasting, and advanced-analytic modeling and simulation.
To harness the transaction data from your trading network, use an integrated demand-supply management platform to combine the information with other data to accurately analyze performance trends and forecast customer demand.
Analytics to Unlock Supply Chain Insight
You can integrate data from different supply chain operation systems, such as order management, inventory management, warehouse management, e-commerce, and transportation management, and make it accessible to various departments or partners in the supply chain.
Data integration, plus predictive analytic models, helps utilize data from various sources in your network to forecast demand, support fulfillment, and support real-time decision making. For example, you can combine POS and e-commerce sales data with geospatial data to devise a fulfillment strategy by clustering customers in regions, or to improve drop-ship efficiency by increasing real-time visibility into vendor inventory management strategies.
Inventory Optimization Thrives with an Integrated Platform
Effective supply chain management can no longer be a siloed business function. Data and information from across the organization, and sometimes from your partner network, need to be coalesced and analyzed to inform forecasts and fulfillment. This starts with supply and demand integration on a unified platform that connects all teams in a centralized real-time data environment – so information and forecasts can be shared in a timely manner.
Request a live demo to see how Vanguard Software can help.