3 Major Challenges for Omni-Channel Retail Inventory Planning

This article was originally published in RIS News.

For many years, the single-channel brick-and-mortar retail model meant that supply chain processes were fairly straightforward. Occasionally, things might go slightly wrong, such as a store being out of stock of the shoes your customer wanted in her/his size. In that case, generally the retailer would lose the sale.

In the omni-channel retail world, things are much more complicated. Today when a customer buys shoes online, their order can be fulfilled from a central warehouse, a dedicated fulfillment center or a local store that caters exclusively to online shopping. The customer may want the shoes to be delivered to their home or office. They can also choose to send them as a gift to another address or collect from their preferred store. 

Now, it is vital to give customers what they want, when they want it and where they want it. Yet this level of customer centricity is placing huge pressure on retailers, as they have to ensure their supply chains can deliver the promises they make.

Here are 3 of the main challenges retailers face in adapting their inventory planning processes to win in this new omni-channel world.

1. Accurately forecasting omni-demand

Identifying and forecasting omni-channel demand is no easy task. Hundreds of factors determine the inventory needed for each store or warehouse. Some events have predictable timings and can be planned in advance, such as Christmas or Black Friday. But some other events are more difficult to predict. 

For instance, fear of Covid-19-related lockdowns prompted panic bulk-buying of supermarket staples, such as pasta and toilet paper. When a celebrity appears (at a live event or on Instagram) wearing a particular coat, dress or nail polish, the item can sell out in-store and online within a few hours. In an increasingly data-driven online world, customers receive product recommendations based on anything from their previous purchasing patterns to local weather forecasts. 

On the other hand, more retailers realizing that predicting physical store sales is no longer enough. They need to consider the effect of inventory transactions such as BOPIS (Buy Online Pick-Up In Store) or home delivery from store. While considering these, they should also pay attention to the timing gap between the sales order and fulfillment order.

2. Serial returners

When customers buy online, they are much more likely to return items. According to recent Barclaycard research, around 30% of online shoppers deliberately over-purchase and subsequently return unwanted items. Another 19% also admitted to ordering multiple versions of the same item (in different sizes or colors), so they could make their mind up when they’re delivered. Therefore, it’s important to consider an  increasing return ratio as a critical factor in forecasting and inventory planning both at stores and DCs.