Webgility statistics reveal that “37% of online sellers who manage inventory in-house say stocking issues — overselling items, restocking popular items, overstocking, and supply chain issues — are their biggest inventory challenges.” Further, many retailers utilizing established eCommerce inventory management strategies report only moderate comfort in managing these processes effectively. In a landscape where consumers are increasingly drawn to the convenience of online shopping, it's not just vital for retailers to have transparency over inventory flow. It's also important to grasp the broader retail forces impacting inventory, a concept known as "explainability."
Unraveling the Complexity of eCommerce Inventory Management
Inventory management is not a simple, constant process; it's a complex network involving multiple interlinked components, like a puzzle where each piece impacts the whole. Viewing inventory through the lenses of accuracy, visibility, and explainability can shed new light on its role as the cornerstone of omnichannel operations.
Accuracy: Pertains to the inventory that is or isn't in stock and which items need cancellation
Visibility: The ability to identify correct and incorrect records among all available ones
Explainability: Understanding the behind-the-scenes processes shaping the Available-to-Promise (ATP) inventory
Fig.1. Facets of Inventory Management
While accuracy and visibility might be familiar concepts—fundamental to understanding where your inventory is and its ATP status—explainability dives deeper. As an internal process, explainability offers valuable insights into how the ATP is determined. These insights can guide intelligent decision-making and successful eCommerce inventory management. Moreover, explainability plays a vital role in synchronizing efforts among various teams managing the inventory flow, fostering transparency and trust among stakeholders.
Multifaceted Challenges of eCommerce Inventory Management in Omnichannel Retail
Omnichannel retail offers customers a myriad of ways to engage with a retailer: in-store shopping, online platforms, apps, social media, B2B sales, and more. The increasing diversity of these channels makes eCommerce inventory management more complex. Retailers face the daunting task of harmonizing inventory allocations across all channels, ensuring customer satisfaction without compromising operational efficiency. Each channel, with its unique inventory expectations, further complicates the scenario.
Several crucial inventory metrics require regular monitoring, including system availability, fill rate, cancellation rate, and substitution rate. The 'Found rate'—the Fill rate minus the Substitution rate—provides a true measure of inventory accuracy. This metric indicates the proportion of demand met through the original inventory, excluding substitutions, offering an unvarnished view of inventory efficiency that aids clear decision-making.
Building Trust, Facilitating eCommerce Inventory Management Through Explainability
In the retail industry, explainability equips retailers and supply chain owners with the tools to manage their businesses more effectively. By shedding light on inventory processes and decisions, explainability builds trust and confidence within operations. Platforms that allow users to delve deeper into the numbers that constitute the ATP inventory facilitate this process. The clarity derived from this transparency not only bolsters the credibility of the service but also fosters trust among stakeholders, fortifying their confidence in the service provider's capabilities. In this way, service providers can cement their position as reliable facilitators of eCommerce inventory management in the omnichannel retail landscape.
Establishing a Single Source of Truth in eCommerce Inventory Management with an Omnichannel OMS
How can retailers manage the many elements contributing to their overall eCommerce inventory management? The answer is to establish a single source of "truth" of Available to Promise inventory. In an optimally integrated retail ecosystem, all channels for receiving orders should be interconnected, with data flowing into a unified tool for efficient management. This tool, operating in real-time or near real-time, should maintain up-to-date information for informed decision-making. Importantly, this real-time inventory pool—collated from various order channels—is separate from the Enterprise Resource Planning (ERP) system, focusing specifically on immediate availability across different sales channels.
Realizing eCommerce Inventory Management Accuracy
Modernized solutions that integrate diverse systems like Warehouse Management Systems (WMS), Point of Sale (POS), and Enterprise Resource Planning (ERP), provide a comprehensive view of eCommerce inventory across the entire value chain. This overarching perspective boosts order fulfillment efficiency and enables stakeholders to understand the components shaping ATP inventory. These systems offer the capability to offer real-time ATP inventory synchronization across channels helping businesses better understand and articulate how inventory status is determined. This clarity enhances transparency and builds trust within the organization, reinforcing retailer credibility with customers and stakeholders alike.
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The rapidly evolving e-commerce landscape necessitates advanced eCommerce inventory management strategies for retailers. Effective handling of inventory is no longer about just maintaining the stock; it also involves understanding the driving forces behind ATP inventory. The concept of 'explainability' serves as a crucial component in this process, providing retailers with insights into the underlying factors that determine their ATP inventory.
By focusing on accuracy, visibility, and explainability, businesses can optimize their inventory management, foster transparency, and build trust among stakeholders. An integrated system that provides real-time inventory synchronization and a holistic view of the inventory, further streamlines this process, facilitating more informed decision-making.
About the author
Nick has a strong background of experience in eCommerce operations, omnichannel order fulfillment, and inventory management. Before joining BJ's Wholesale, he worked as a senior manager at rue21, where he supervised order fulfillment, inventory control, merchandising, and merchandise planning. Nick also has previous experience in merchandising and inventory control from working at Boscov's Department Store as their department manager, as well as from working at JC Penney in their shoe department as a salesperson.