Managing virtual stock

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With the high street stagnating, what retail growth there is, is largely online and involves increasingly challenging stock management and logistics options

Long ago and far away when the shopping options were largely limited to either mail order or real-world stores, the last stages of the supply pipeline were simple: post, home delivery from store or – overwhelmingly – shoppers carrying their goodies away with them.

Today it is very different. Online shoppers may be browsing a catalogue of goods actually available in a retailer’s warehouse or stores, or – increasingly commonplace – they could be shopping from a virtual catalogue. A selection of goods which might be available from a high street store but are just as likely to come direct from an assortment of suppliers – drop ship vendors – or from more than one retailer or distribution centre.

Those customers will also expect the goods to arrive in one consignment and will also probably expect an SMS message or email confirming dispatch and a second text on the day of delivery giving an approximate delivery time. Failure to live up to these expectations inevitably leads to those “where is my order” (“wismo”) calls to the call centre with each minute of an operator’s time adding to the total “cost to sell” and diminishing squeezed margins still further.

Retailers too have their own juggling acts to perform. Gone are the boom days when each store had its sacrosanct allocation and anything left unsold at the end of the season could be marked down for the clearance sales with no great damage to profitability. Gone too is the idea of a separate stock allocation for online business. Today, most retailers are happy to grab sales wherever they can, which means the creation of a real-time single stock pool, so that online orders can be fulfilled direct from branches, if that is where the product happens to be, or a store can rush the right item from a nearby branch in hours – or in some cases minutes – to satisfy the requirements of a willing punter.

Such “virtual inventory” demands not just accurate stock records but a real-time knowledge of whether the goods are actually still on the shelf, heading to the checkout in a shopper’s basket, or languishing in a fitting room while a would-be customer decides on a purchase. The old idea of overnight batched stock updates is no longer adequate in a world where shopping is a 24/7 activity.

Perhaps not surprisingly consultants such as Kurt Salmon, report growing interest in RFID (radio frequency identification) especially in the fashion sector where complex stock options compound availability problems, and numerous low-profile RFID trials are currently underway.

For retailers, and their logistics The concept of “virtual stock” and drop shipment direct from suppliers is spawning new channels that effectively bypass the retailer, this transformation in customer shopping habits and consumer expectation is also leading to a flurry of investment in dedicated IT tools that can perform some of the complex tasks that multiple stock    sources and multiple delivery options demand.

Companies like MetaPack and Axida – both of which spent many years trying to persuade retailers that their products really could add value – are currently experiencing a sales boom, as the need for efficient carrier management increases. Equally, Sterling Commerce – now owned by IBM – is seeing steady demand for its multi-channel order management system: a suite originally also developed in the heady era, this time by Yantra more than a decade ago.

Back in those days most retailers were sceptical about the potential for online operations, firmly believing in the dominance of “bricks and mortar”.

Today what retail growth there is is focused on the new digital channels – be that online shopping, marketplaces (a la Amazon or – to name but two of the myriad   now emerging), mobile commerce or via social networking sites (so-called “f-commerce” after Facebook).

Coming soon will be t-commerce as digital television gets into its stride and product placement allows viewers to click directly from their TV screen to the web to place an order.

Interestingly too, the concept of “virtual stock” and drop shipment direct from suppliers is spawning new channels that effectively bypass the retailer altogether. In the US, offers “100 per cent free shipping” with a wide range of household goods direct from leading CPG brands. In July, Alice arrived in Europe merging with a Spanish company,, to create a similar format operation. Alice already plans expansion to Germany, France, Italy and the UK by 2013. As the company puts it: “Expansion will provide global CPG manufacturers with a platform to engage international audiences, while giving consumers a whole new way to shop online and save money on all their household needs”.

While high street shops will undoubtedly survive, futurists predict significant changes in the retailer’s role with extended stock options available via in-store webscreens and increased use of home delivery as inventory is spread more thinly, to cut overheads. And all the while, Mrs Customer expects lower shipping charges, consolidated consignments, and timed delivery slots: virtual inventory certainly comes with plenty of challenges.

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