By Ivan Kot, Itransition
In retail, inventory management is acknowledged as a pillar of a successful business, and rightfully so. Aimed at ensuring the brand has the merchandise the customer base wants, in the right amount and at the right time, this process helps minimize operational expenses and keep customers satisfied.
Due to its vital role, inventory management is a common subject of retail software development. However, the recent global uncertainty and economic perturbations have put current inventory tools to the test.
Today, more and more brands are finding their conventional software insufficient to deliver stock visibility and meet operation control requirements. What is more, the circumstances aggravated major challenges inherent in inventory management, such as stock shrinkage, demand forecasting, and multi-location inventory control, making them a threat to business continuity. At this point, businesses need breakthrough solutions to step up their inventory management game, and the retail tech market appears to have exactly what they need.
Let’s look at how emerging technologies promise to resolve long-lived bottlenecks in inventory management processes.
Beacons For Inventory Shrinkage Prevention
The retail industry’s battle with inventory shrinkage is long, ongoing, and not particularly fruitful. Despite the pervasive implementation of inventory control, surveillance systems, and loss-prevention training as part of employee education programs, items still get lost, stolen, damaged, and misplaced, costing retailers $61.7 billion, or 1,62% of their income in 2020, according to the annual National Retail Security Survey.
Of all the common shrinkage prevention solutions, inventory tracking appears to be the weakest link in the chain. To control the amount, quality, and location of the inventory in possession, most companies still rely on old-fashioned scanning products upon their arrival to or departure from the warehouse and logging the data into the system. Unfortunately, this inventory tracking method does not provide real-time visibility into the stock location or state and offers no way of alerting the management if theft or misplacement is happening.
By equipping warehouses with Bluetooth-enabled beacons and tags, companies can gain full control over their inventory movement and automate a large portion of stock-taking and item-locating operations. Upon arrival, each pallet and crate are affixed with a small BLE tag, and the beacons located around the storage location automatically register their location, transmitting this data to a unified inventory system.
Such infrastructure also will aid the staff with finding misplaced items in a large storage facility and preventing products from going expired or outdated. What is more, when a piece of inventory is unduly moved or its tag is removed, beacons automatically send an alert, allowing the staff to thwart a potential theft attempt there and then.
AI For Inventory Forecasting
Inventory forecasting is a pivotal operational planning process for a retailer, the accuracy of which determines future profit margins, storage expenses, and customer satisfaction.
Traditionally, to estimate the demand, companies use formulas that mostly consider a range of historic data, like sales totals, demand in previous months, etc., and try to correlate the results with the planned promotions, current trends, stock levels, and other factors. Today, however, amid the pandemic-induced supply chain disruptions and volatile customer demand, descriptive analytics proves too rigid and limited and therefore inadequate to deliver accurate forecasts. Amid the current global uncertainty, continued reliance on these methods can be particularly damaging for the retailer’s profitability.
By switching from descriptive analytics to AI-powered predictive analytics, businesses can tap into truly future-oriented inventory forecasts. Machine learning algorithms analyze and interpret historical and statistical data sets as well as a wide range of external factors affecting demand. Upon completion, they come up with patterns that human-led analytics miss and yield accurate predictions on future customer demand and the levels of stock needed to satisfy it.
Beyond that, AI-enabled inventory forecasting tools can tell not only how the demand will change but also why, allowing retailers to prepare in advance for this by optimizing their supply chain, marketing, and sales operations accordingly.
Despite the high adoption costs and significant implementation barriers, the retail industry is growing more eager to tap into the potential of predictive analytics for inventory management and more. According to the 2020 MHI Annual Industry Report, 28% of retail supply chains relied on predictive analytics last year, and in five years the adoption rate is projected to reach 82%.
Cloud For Multi-Location Inventory Management
When the retail business grows and thrives, sooner or later the owners decide to expand. Whatever strategy they choose to pursue, from opening new store locations to tapping into new markets, it typically entails the increase of storage space. In this case, one more challenge adds up — multi-location inventory.
Expanding to several warehouses, businesses set up separate inventory management systems for each location. Basic software may be sufficient for monitoring and managing on-site stock but gaining visibility into the overall inventory levels usually presents a problem. With retailers opting for traditional on-premises inventory tools for security reasons, managers need to communicate incessantly with each other or submit reports daily to keep the data synced across their warehouses. This practice puts an additional strain on the staff and is fraught with the risk of miscommunication.
Cloud-based inventory software appeared on the market a little while ago but has already proven a game changer for multi-location stock management. Uniting inventory systems from separate warehouses within a single digital infrastructure, cloud tools offer managers a single pane of glass, relaying information about order processing, dispatches, sales, and returns as they happen. What makes cloud inventory software even more compelling is its on-demand scalability, as it allows fast-growing businesses to simply request additional resources and get access to them in short order.
The current popularization of advanced technology is changing the way retail operates, streamlining previously cumbersome processes and creating opportunities for cost-saving and service quality improvement. In this context, to maintain and improve their market positions, retailers should invest in enhancing both customer-facing operations and back-office workflows.
Inventory management, crucial for business continuity and customer satisfaction on the one hand and riddled with efficiency-hindering bottlenecks on the other, appears the right candidate to carry out this qualitative improvement, while such technologies as beacons, AI, and the cloud prove to be the most suitable for the task.
About The Author
Ivan Kot is Customer Acquisition Director and Solution Consultant at Itransition.