Achieving optimal stock distribution in an Omni-channel world

THE KEY TO PROFITABILITY

If you can route orders to where the stock is, what is the right strategy for stock distribution in an Omni-channel retailer.

The cost of stock is now believed to be 11% of the value of stock. That includes all the costs of handling, moving, storage, counting, and cost of finance. This excludes the cost of stock ‘markdowns’, which can be very large.

So if we can reduce stock by £10m, that will add £1.1m to the bottom line, and every increase in stock will impact profitability correspondingly.

If you go the opposite way, as retailers eventually increase product range, and they are operating to 4-20 weeks stock cover the impact on ‘profits can be huge’. Not to mention the squeeze it brings on ‘cash’.

So CAN RETAILERS HAVE THEIR CAKE AND EAT IT? The answer is ‘YES’.

Omni-channel retailing means you can increase your product range without significantly increasing your cost of ‘stock’. Here’s how.

If you have sophisticated Order routing and with astute delivery pricing models, consumers now know that the ‘rarer the product’, the longer it may take to get it.

So most consumers are conditioned to have varying service levels on lead times to delivery.

The longer the lead time, the free’er the delivery, the shorter the lead time, the more costly the delivery.

So that means you can distribute stock more intelligently.

It can all be driven by rate of sale or ‘rarity’ of product or cost of distribution.

You can hold fast sellers close to the customer and slow sellers further up the supply chain. Including using your suppliers and their factories into the equation.

To achieve that you need two things.

Better range planning and stock optimisation combined with better Enterprise Order Management.

Intelligent Order routing allows for better/smarter range planning and stock distribution.

It means
Bigger ranges smaller stock investments



 

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