Inventory deployment has become a critical issue in retail, according to a new study by LCP Consulting entitled “Integrating the retail supply chain”.
This involves getting the right stock in the right place at the right time to deliver stock availability and sales – while at the same time minimising fulfilment costs and the overall risk on markdown and clearance at the end of the season. This approach can often achieve a three to five per cent improvement in net margin, increase sales potential, and reduce working capital.
Twice the number of retailers from the previous year (34 per cent compared to 16 per cent in 2015), cited reduced fulfilment costs as one of the top three advantages to an integrated business model. The report says that a prime example of changing operating models to reduce costs is the increasing trend towards fulfilment of Click and Collect orders from store stock.
LCP retail partner Stuart Higgins said: “Of course, fulfilling from store stock requires a greater accuracy of the store stock file and real-time visibility of this stock. But, once achieved, it is far cheaper and more reliable to replenish Click and Collect orders from store, than to route them through a central Fulfilment Centre for onwards shipment to store.
“Supplier direct delivery – where suppliers deliver to the customer directly on the retailers’ behalf – can also generate a higher overall net margin and lead to significantly less operational risk for the retailer, especially for slower moving products. However, use of this channel needs careful consideration to ensure service standards and brand values are maintained consistently.”
The report also found that only 39 per cent major retailers are actually talking to customers to understand their needs despite the fact that 77 per cent believe that the most successful businesses focus on delighting the customer first to drive profitability.
LCP interviewed more than 100 major retailers in the UK and US, in addition to a number of senior retail executives.
It argues that successful retailers need to be aware of five key areas: customer expectations; an emerging focus on service; the customer-driven supply chain concept; the benefits of a customer-driven supply chain; and the challenges of implementing a customer-driven supply chain.