Inventory Sourcing 101

April 6, 2021
Strategy

Customers want convenience above all else. Often, this convenience manifests in options — none more prevalent than the simple question retailers find themselves asking today: Curbside pickup, or same-day delivery? Both options represent tremendous customer convenience, but each brings new logistical challenges for retailers.

To satisfy the demand for convenience and to earn the satisfaction of their customers, retailers need to present both options with as much efficiency as possible. This means working out fulfillment logistics in real time, using distributed inventory.

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Benefits of Distributed Inventory

Multiple stores with identical products and varying inventory levels can look like a challenge but actually presents an opportunity. Instead of looking at the situation as multiple inventories, retailers need to see it as diverse fulfillment options. You might have inventory at locations A, B, and C, but that means you also have fulfillment opportunities of X, Y, and Z. In addition, you have less risk, more availability, and more product exposure.

There’s tremendous flexibility in seeing multiple inventories as fulfillment opportunities. Retailers can more efficiently answer customer demand for online and curbside orders, while maintaining convenience for in-store shoppers. Distributed inventory is the key to omni-channel balance. But there are challenges.

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Where do you fulfill from?

The biggest challenge in inventory sourcing is determining the ideal fulfillment location. It’s easy to push fulfillment to one site if it’s the only one with inventory; however, more often it comes down to choosing the best fulfillment option rather than the only one. If locations A, B, and C all have ample inventory of a product, how can you get that product into the hands of the customer most effectively? The answer depends on the customer.

  • The simplest solution is to ask the customer where they want to pick up the product. This is optimal because the customer dictates their own experience. They choose the product and location, and they set their own expectations. There are few logistics involved.
  • For larger chains, the nearest available inventory solution often provides the most convenience for customers based on their locale. However, this doesn’t account for inventory balancing and could lead to the need for rebalancing across locations.
  • Largest available inventory pushes customers to the location with the largest inventory, but this approach disregards distance. While it helps balance inventory across locations, it may do so at the expense of customer convenience.

These examples assume customer pickup, which about 44% of brick-and-mortar retailers now offer. Options for fulfillment become even more convoluted when you factor in delivery and events that introduce items back into inventory (e.g., returns, exchanges).

There are challenges in managing one dynamic inventory, let alone multiple inventories as part of a broader fulfillment strategy. The need for cohesion across all inventories is paramount, and the solution needs to operate within the context of efficient fulfillment.

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Connectivity is key in omni-channel fulfillment

The complexity of retail fulfillment is only increasing. Shoppers now expect endless options from retailers, and the expectation for convenience will only grow. How long until curbside pickup evolves into home delivery? For some retailers, it already has.

As the fulfillment ecosystem grows, so does demand for better governance. It’s not enough to have options — companies need the systems that optimize fulfillment and make it easy to scale and adapt to customer demand for curbside pickup, same-day delivery, and future options. This means real-time transacting between distributed inventories, synced with on-site and online POS systems. When a customer makes a purchase — no matter how they opt for fulfillment — retailers need to know exactly where in inventory that product comes from and how to get it into the customer’s hands.

It all boils down to customer satisfaction. Distributed inventories need to be as dynamic as fulfillment options, and retailers need a way to orchestrate fulfillment within the context of customer expectations. When the process is smooth, simple, and barrier-free, the shopping experience is a positive one. When it’s positive across every channel, customers have no reason to shop anywhere else.

Are your curbside and same-day delivery options as agile as your customers expect them to be? If they don’t offer immediate, optimized solutions for getting products into the hands of your customers, Nextuple can help. Visit our website to learn more about how we connect online orders to physical fulfillment and the technologies we use to make the process seamless.

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