The Key Reason Your Inventory Replenishment System Loses Your Money

How close are your Inventory Replenishment processes to your end customers? Inventory Replenishment controls your largest dollar investment; is it the strongest link in your chain or is it time to tighten this link in your chain? Today’s smart phones have created smarter customers with higher service expectations for their retail stores. The information super highway has shortened a retailer’s corporate decision timeline for demand planning and inventory replenishment responses to market changes. The challenge is how to become more customer centric. How do you provide higher service for your customers with the right products, in the right quantity, at the right location, all in less time?

Fast Response Inventory Replenishment

The core of becoming Customer Centric is centered on the idea that processes and inventory replenishment systems need to be more responsive to the end customer, decreasing response times without buying additional inventory. The key issue is 95% of inventory replenishment systems and processes have multiple layers between inventory replenishment and end customers. These layers include corporate planning, warehousing, logistics, and promotions.

Inventory Replenishment & Supply Chain Layers

These additional layers take time to navigate from top down to the store and end consumer. Each layer also creates complexity and mixed messages. Remember the corporate telephone game? You sit with a group of people at a table and a written message is read by the first person who then whispers the message to the next person and the message is passed person to person (like layers in your supply chain). By the time the last person gets the message and writes it on a board, it is never close to matching the original message. Sound familiar? It is time to change how you think about inventory replenishment; it’s time to review your top down process and find better systems.

“It is not the strongest of the species that survives, nor the most intelligent, but rather the one most adaptable to change.” a paraphrase of Darwin in the writings of Leon C. Megginson

The Demand Planning Little White Lie

The little white lie someone said was that demand planning with ‘product/ location’ demand forecasting is a consumer centric approach. If top down demand planning was really consumer centric, would we hear so much chatter about the need for supply chain visibility?

Bottom Up Inventory Replenishment

To survive in today’s marketplace, retailers need to replace their top-down, plan based legacy inventory management systems with bottom-up, service level based, customer centric Inventory Replenishment systems to keep up with customer demands. A retailer is customer centric when it is able to provide the desired amount of product, at the appropriate location and time. In order to do this successfully, a retailer has to ensure a high level of service without overspending on inventory to satisfy the requirement.

Right Product, Quantity, Price and Location

Retailers need to have the product desired for purchase when it is requested. This entails accurate Demand Forecasting of how many the customers want and replenishing the inventory in time to service the customer request for the product. Poor forecasting, the failure to predict the amount of product to keep in one’s inventory, will mean the loss of that particular sale. Today’s replenishment software will deploy the inventory at the right levels without having too much of that product on hand.

4 Ideas to Guide Your Demand Driven Success with Demand Forecasting –Click Here

Your Old Systems Were Not Designed for this Change

Using legacy systems, retailers cannot meet their customer’s expectations; how would a retailer calibrate the need for adequate supply of the product against having too much of it? Successful retailers will invest in bottom up, service driven systems, a dramatic swing away from the top down planning systems used in most retail operations today.

Change is a Good Thing

The key to responding in time to customers is the use of accurate demand forecasting with bottom up, service driven systems. If you need help reviewing your inventory replenishment and demand forecasting, please Contact Us. If you are looking for a new system, iKIS by Data Profits is a bottom up, service driven, demand forecasting system. iKIS can be installed easily in less than 30 days and provide game changing capability in no time. It’s time to ‘Tighten the Links In Your Chain’™
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Stuart D

Stuart Dunkin is a strategic visionary who leads by calling on his broad range of experience as a former retail executive as well as a consultant for top retailers and for the E3/JDA software company. He founded Data Profits to solve a real-world problem plaguing retailers today – the disjointed relationship between supply chain data, people and business goals. He has experienced first-hand the challenges and frustrations that occur when decisions are made based on wrong data, which often leads to the wrong actions being taken with crippling results like overstock, out-of-stock, and increased working capital.
Stuart graduated from Auburn University, with bachelor of science in business administration.