![]() Optimizing inventory lets brands track products in real-time across the entire supply chain. Meanwhile, too little inventory leads to stockouts and missed revenue opportunities. This is critical to optimization because excess stock costs capital (and raises holding costs). That way, you always have enough inventory to meet demand while minimizing costs. ![]() Inventory optimization enables brands to keep balanced inventory levels. Here are the top 6 benefits: Benefit 1: Balanced inventory levels With this information, brands can make informed inventory replenishment decisions that keep storage and holding costs low.Īs you already know, inventory optimization has lots of benefits for retail brands. Demand forecastingĭemand forecasting is when brands use historical data and real-time inventory trends to predict future customer demand.Īdmittedly, demand and inventory forecasting software is never 100% accurate.īut demand projections ensure brands are prepared to meet customer demand while radically lowering their stockout and overstock risks (compared to operating blindly). That way, you only restock what you need to meet demand. With this information, you can determine what, when, and how needs to be reordered at any point in time. The replenishment process considers each SKU’s reorder point, your optimal order quantity, current inventory levels, and your supplier’s purchase order lead time. Stock replenishment is when you receive more shipments from the manufacturer to return to optimal inventory levels. However, this storage space is also radically expensive and poses risks that put the brands’ low-cost business model. This allows the ecommerce fast fashion giant to fulfill those orders faster because the warehouse is closer than its China counterparts. It also informs how much you’ll spend on operational costs in the process.įor instance, Shein just opened its first stateside fulfillment center because it ships so many orders to the US. Where you store your inventory is key to inventory optimization because it informs how quickly you can fulfill demand. For instance, this might be in self-storage, warehouses, 3rd-party logistic fulfillment centers, or distribution centers. Inventory storage is where you keep inventory. Optimal inventory levels mean you only order what you need when needed. Too little inventory means stockouts, which frustrate customers and limit your ability to generate revenue. Too much inventory requires a lot of working capital upfront and risks SKUs turning into dead stock. Inventory levels refer to the number of products you have in stock at any single moment in time. Here are the 4 key elements involved in the inventory optimization process. Key elements of the inventory optimization process Meaning, you will optimize your inventory at the manufacturer, warehouse, or fulfillment center level separately instead of optimizing levels across the whole network like with multi-echelon inventory optimization. This type of inventory optimization determines and balances stock levels for each independent echelon instead of optimizing levels across the entire network. Single-echelon inventory optimization focuses on stocking the right amount of SKUs for each link throughout the supply chain. What is single-echelon inventory optimization? This holistic view considers the supply chain network as a whole, from manufacturer to distributor to customer (and vice versa), instead of seeing each stage of the supply chain as its own distinct process. Multi-echelon inventory optimization is where brands and companies leverage technology to sustain optimal inventory levels across their entire supply chain. What is multi-echelon inventory optimization? To do this, most retailers rely on an inventory optimization solution like Cogsy to track inventory in real-time, accurately forecast demand, and automate their inventory planning process. Inventory optimization means keeping the ideal amount of inventory available to meet customer demand and issues like dead stock or stockouts while keeping operational costs low.Īs a result, retail inventory optimization improves the bottom line and makes reaching their revenue goals easier. Here’s how retail inventory optimization works. That’s because inventory optimization ensures you have whatever your customers want in stock when they want it (regardless of global supply chain disruptions).Īs such, you can easily meet customer demand without accumulating a huge backlog of orders or eye-watering holding costs. In the direct-to-consumer (DTC) industry, most retailers focus on growing their brands through marketing and sales.Īs these methods increase customer demand, there’s a massive opportunity for new revenue – but only if you embrace inventory optimization first. ![]() But few do the one thing that all but guarantees growth: Optimizing their inventory.
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