How to Change Your Inventory Management Strategy in the Omnichannel Era | Elementum

How to Change Your Inventory Management Strategy in the Omnichannel Era

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The U.S. e-commerce market has nearly doubled in size since 2011, and is forecast to grow to $737B by 2022. Managing stock for a variety of commerce channels is becoming more complex, costly, and risky. As recent losses by H&M and other major brands illustrate, poor inventory management can be a major cause of financial distress. It’s clear that in the changing market landscape, where customers expect immediate and accurate fulfillment of purchases, companies need to look at their inventory management strategies with a fresh eye.

The Challenge 

Two major challenges are facing retailers today. First, as priorities shift elusively from brick-and-mortar to e-commerce and back, it can be hard to pin down an optimal solution for storing and distributing inventory. Many companies are transitioning from  primarily physical storefronts, to building or expanding distribution centers to account for rising online sales. The truth is that both B&M and online channels are popular among consumers, but brands need to keep a pulse on where demand for certain products is concentrated if they don’t want to be caught with a ton of inventory that’s just in the wrong place.

Exacerbating this challenge is the problem of siloed communication across the supply chain, leading to massive and unreported delays, bullwhip effects, overstocking, understocking, misplaced inventory, and wildly off-the-mark demand forecasts. Essentially, businesses need a way of keeping their ear to the ground within their own supply chain, so that they can turn their focus onto what matters — serving customers better.


There are a few solutions for the problem of inventory management in the omnichannel era.

  1. Build a quality SKU management strategy: Today’s customers demand greater product availability, more choices, and more customization. This can lead to inventory glut for retailers that want to please everyone but lack a sophisticated way to forecast demand. Retailers should create a system of organization, sharing the same data across every channel and function, in order to make strategic decisions to cut underperforming or obsolete SKUs from the inventory. This system should provide quality and real-time information about products, from quantity, to historic demand, to shipment details, value, warehousing costs, and more. Crystal-clear inventory visibility across all channels, which can be used to forecast future product demand, is a must-have.
  2. Invest in IoT: The Internet of Things creates a network between internet-connected physical devices, which can bring better visibility and traceability to stores and warehouses. IoT applications like smart shelves, RFID tags, and robots, could help manage inventory better while reducing error rates. According to Forbes, about 70 percent of retailers will be investing in IoT technologies by 2021, with over 30 billion IoT devices.
  3. Improve the process: Implementing cross docking (moving products straight from suppliers to customers or storefronts with little to no time in a distribution center), when practical, can help companies reduce costs. Companies with fast-growing e-commerce sales should have direct fulfillment centers for faster shipping. Additionally, having storefronts double up as e-commerce fulfillment centers can provide some wiggle room for retailers whose sales are distributed across multiple channels.
Christine Balba

Christine Balba


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