DC Velocity - August 2019

T ec h n ol o g y INV EN TO RY MANAG E M EN T

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leaders are rethinking some of their traditional inventory practices. For instance, they might be making more frequent replenishment shipments to stores than they once did in a bid to clear space in their warehouses and DCs for the new arrivals. Or they might be cross-docking more of their freight to eliminate the need to bring it into their warehouses and DCs altogether.

Likewise, they appear to be relying more heavily on outside partners than they might have in the past. Saenz says he’s seen a rise in the use of third-party logistics service providers (3PLs) by companies facing a shortage of warehouse space.

Saenz also reports that he’s seeing greater use of “ inven-tory-shifting” techniques like drop shipping and vendor-di-rect shipments that allow retailers to fulfill customers’ orders without holding the inventory in their own stores and warehouses. All of these strategies can help retailers reduce their total-network inventory, or the total amount of goods in their supply chain at any one time.

BETTER DATA FOR BETTER PERFORMANCE

Retailers and consumer packaged-goods (CPG) compa-
nies are feeling pressure in the run-up to the 2019 holiday
season, agrees Ram Krishnan, chief marketing officer at
artificial intelligence provider Aera Technologies. “People
are freaking out a little bit and saying, ‘Let’s go with the
time-tested technique and front-load,’” he says.

In order to handle that flow of extra goods earlier in the
season, companies are striving to be more agile by analyzing
feedback from real-time data and making decisions at the
“point of impact”—fulfillment centers and retail shops—
instead of at a distant corporate office. “Many companies’
supply chains are designed on models and assumptions
created 30 years ago about capacity, supply and demand,
and productivity,” Krishnan says. “Supply chains were built
at scale for serving the masses. But those assumptions are
being challenged.”
Real-time data is a key ingredient for retailers trying to
adjust to that new reality and predict how economic trends
will affect consumer sales, says Jim Hull, senior director for
global value delivery at supply chain technology firm JDA
Software Group Inc. “Companies need the ability to sense
and respond in order to be flexible and resilient,” he says,
adding that machine learning and big data can play a role
in this regard.

“The best of all worlds is to position inventory [in front of customers] early and to sell it at full price and clear out that inventory at full margin,” Hull says. “But it will get harder and harder for any retailer to hit those targets because of the growth of online sales [which require retailers to maintain a vast array of stock-keeping units] and the lengthening peak season,” he says, noting that what was once a four- or five-week holiday shopping season has stretched to eight, nine, or 10 weeks.

Better data is also key to optimizing internal warehouse and logistics operations, according to St. Onge’s Saenz. Although that might seem obvious, he says, many companies lack the basic data necessary to make good decisions.

Building a database for inventory management doesn’t always require sophisticated inputs, just basic statistics like the items’ weight and dimensions, Saenz says. Armed with those specs, users can make quick decisions on such questions as whether to store inventory by units or by pallet, what type of storage rack and material handling equipment is required, and how many loads they can fit in a trailer.

“It seems really basic, and maybe the big companies can do it, but most companies don’t seem to have that information, so they end up oversizing or undersizing [their inventory],” Saenz says.

And in a turbulent year like 2019, committing these kinds of business blunders could prove fatal to retailers struggling to survive in a competitive marketplace.

“The motto of the day used to be ‘Stack it high and let it fly,’ but as they get better at supply chain management, companies are looking for ways to [adapt to] the world of e-commerce and cope with the pressure of tariffs,” Softeon’s Gilmore says. “We’ve seen store closings and bankruptcies in recent years. If you don’t get the inventory game right, it’s not just a hit to your profit; your very survival is at stake.”