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Omni-channel retailing adds the flexibility of cross-channel and mobile shopping to the unique revenue- and loyalty-building capabilities of the face-to-face retail experience. It offers opportunities to build deeper shopper relationships—or risks ending them, when availability promises go unmet.
Supply chain visibility and stock availability equals more revenue
Keeping availability promises depends not only on integrated IT systems, but also on reliable inputs and outputs to those systems, across the boundaries of physical locations and technologies, covering both the short and long term. Retailers who succeed at integrating their inventory intelligence for shoppers, associates, and managers can cut costs, accelerate turns, and build revenue by driving high-fidelity information back into the supply chain, aligning it with shopper demand.
Integrated inventory intelligence is essential to deliver on the omni-channel promise and future-prepares retail by eliminating information islands, adapting quickly to new processes and technologies, and keeping cost and waste low.
Omni-channel opportunities and risks
Omni-channel retailing gives stores omnipresence—an advantage once claimed exclusively by online merchants—and affords stores the opportunity to offer their merchandise to shoppers at the moment of interest, and sell at the moment of decision, without sacrificing their environmental and interpersonal distinctions and the instant gratification of in-store pickup. But omni-channel raises shoppers’ expectations with a promise of availability. Breaking that promise affects all channels and compromises the brand.
Risks compound when retail sales associates don’t trust “the system.” Staff mistrust causes hesitant selling, wastes time double-checking inventory, and communicates lack of confidence to the shopper. Refunds and returns—essential to recovering trust—are often the weakest link.
Why is this still a problem?—the need for integrated intelligence
Retailers, suppliers, and software providers have been working on cross-channel technologies, but IT integration alone can’t provide the integrated intelligence that omni-channel retail requires.
Quality information depends on trustworthy, up-to-date inputs and outputs. Timely, accurate inputs and outputs, organized into actionable information make up what we call integrated intelligence: spanning physical locations, technologies, and time.
Integration across physical locations
Retail supply chains are vast, efficient, and—considering their complexity—very accurate. But even the fastest, most accurate supply chain is at the mercy of poor-quality information from retail endpoints.
And that’s where information risk sneaks in, from inputs and outputs outside the “walled garden” of integrated supply chains, and especially inside the store:
- At the back door, inputs must document a complex array of sizes, styles, colors, and options, and outputs must reflect the same information on returned items.
- On the items themselves, inputs and outputs are coded in tags that must be compact, detailed, and tamper-resistant yet easy for store associates to remove.
- At the point of sale, systems must capture transaction, loyalty-program, gift card, and coupon data, and help detect, remove, and recirculate tags.
- At the front door, inputs and outputs should show real-time store traffic and intercept shoplifters without intruding on the legitimate shopper’s experience.
Integration across technologies
Effective omni-channel retail needs to overcome suppliers’ attempts to keep their solutions exclusive and integrate:
- Execution, task management, and workflow, so a task like “enter line item” means the same thing on a POS terminal as on a smartphone.
- User interfaces and reports, so systems give users, the same information in the same way, even when it comes from different sources.
- Sensors with high-fidelity data, so inputs span sensor technologies, and offer enough detail for shoppers to make meaningful choices.
Integration over time
Shoppers want item- and location-specific information right now; retail executives want to track seasonality and long-term trends by region or market segment. Integration over time requires aggregation over time periods spanning:
- Instantaneous availability, location, shipment, and order status: information that answers questions like, “Where is it?”
- Short-term aggregation to define events, track cycles, and evaluate locations, to answer manager-level questions like, “What’s happening?”
- Long-term analysis to answer strategic questions like, “Where are we headed?”
Over any time period, inputs should offer end-to-end visibility across stores, distribution centers, and manufacturers as well as top-to-bottom visibility from the retail floor through regional sales and distribution centers to the executive suite. Most importantly, the information collected should provide actionable intelligence—with execution support to make those actions effective.
Direct and indirect business benefits
What can retailers expect to gain from investments in inventory intelligence? First and foremost, they will have the framework to implement omni-channel retailing with confidence—opening shopping to omnipresent online and mobile environments, while retaining focus on the store. They can also expect direct and indirect business benefits in the areas of cost reduction, inventory management, and revenue growth.
Inventory intelligence helps improve labor utilization, productivity, and morale in stores and distribution centers through automation, accuracy, and upscaling job responsibilities. It cuts the time spent on manual entry and inventory counts, and the time wasted following—and then correcting—information that is either wrong or insufficiently detailed for its intended use. Accurate inventory, allocation, and replenishment information reduces pre-emptive buying and the inevitable markdowns and write-offs that follow from carrying too much stock. And, an automated system that offers top-to-bottom visibility quickly cuts losses from internal shrink.
Fast processes and lean inventories improve inventory turns, and reliable tracking of items and store locations helps stores reorganize their stock to maximize floor-space utilization and sales per square foot. More accurate forecasting, ordering, allocation, and replenishment intelligence helps stores tune their product portfolios and make better use of fixtures, displays and other capital assets. Data-based collaboration with supply-chain partners raises compliance with order cycles and delivery requirements and opens opportunities for closed-loop end-to-end collaboration, as in tag reclamation programs.
The real prize from omni-channel retailing is revenue growth, from:
- Fewer abandoned orders due to out-of-stock events.
- Higher loyalty, from more rewarding shopper-associate interactions and in-store experiences.
- Greater merchandising potential, using clienteling and customer relationship management (CRM) information from in-store, online, and mobile channels.
High-quality inventory intelligence collected from stores in real time feeds back through the entire supply chain, harnessing its efficiencies in the service of shoppers’ demand.
Inventory intelligence is a fundamental component of modern retailing—not only to support omni-channel initiatives, but to assure availability on store shelves or to ship, building shopper satisfaction and financial performance. Inventory intelligence aligns the supply chain to demand, and helps retailers keep the promises they make to online, mobile, and in-store shoppers. It coordinates information up and down their organizations and back along complex supply chains. Flexible solutions, properly deployed, can help retailers seize new opportunities, avoid predictable risks, and prepare themselves for a future that combines shop-from-anywhere convenience with an enhanced shopper experience centered at the retail store.