No doubt you’ve seen plenty of analysis in the business world about real-time technologies and how it’s bringing more immediate results to companies. Whether it’s real-time metrics, marketing, or communications – bringing more immediacy to customers and business associates helps companies make smarter decisions for the future in our fast-paced world.
Similarly, real-time information is critical in your supply chain as well. At the heart of your warehousing and fulfillment operation is properly managing your inventory so your company can effectively re-order product and effectively stock product so that both excess inventory and stock-outs are avoided. The best way to get a handle on inventory is to use software that gives you real-time inventory management capabilities.
Just What is Real-Time Inventory Management?
Real-time inventory management is the process of recording sales and purchases of inventory immediately through the use of a software so that your company gains a complete picture of what’s occurring with inventory, enabling your organization to react quicker to supply chain needs. Rather than periodically updating inventory at pre-determined intervals (usually through the use of inventory counts), real-time systems record every transaction (both purchases of new stock as well as outbound orders and all of the associated costs) in real-time.
The inventory management system serves as the backbone for recording overall receipts and sales of product. For companies that work in a brick-and-mortar environment, point of sale systems provide the technology that enables real-time updates for product sales, whereas companies that sell online will be required to integrate their online sales channels with their inventory system in order to record sales. There are some enterprise level systems that bring all of these functions under one “software platform roof”. Furthermore, companies will oftentimes supplement these systems with other tools, such as RFID (radio frequency Identification) technologies or bar code systems in order to more quickly and effectively record new receipts and sales.
Benefits of Real-Time Inventory
Adding new software and/or supporting technologies to move towards a real-time inventory environment can be a significant expense for companies, so understanding the benefits of moving in this direction is critical for your fulfillment center services. As mentioned previously, the first benefit is that it allows your company to avoid stock outs and excess inventory more quickly than a periodic inventory management scenario. By updating all receipts and sales in real-time, you can tap into up-to-the-minute data, which will enable you to more effectively budget supply and demand of your product. Physically counting inventory on a periodic basis takes more time, and those delays, especially in our age of same day delivery expectations can significantly impact buyer satisfaction.
Which brings us to the second benefit of real-time inventory: enhancing the customer experience. One of the worst-case scenarios is to have a ready, able and willing buyer, only to lose them because you don’t have adequate stock for them to purchase your product in store or online. Not only does this impact your immediate sales potential with that customer, it may also have a negative impact on future sales – not only with that particular customer but potentially with others within their sphere of influence if they decide to share their disdain with others on outlets such as social media.
Third, implementing a real-time inventory system will likely bring some physical benefits to your warehouse as well. First and foremost, this method of inventory management will likely require your warehouse to become more organized. Furthermore, it will also more than likely result in less overall recounts of inventory if diligently managed.
Fourth, real-time inventory is a wonderful asset to your accounting and finance team as well. Knowing exactly how much inventory you need at the right times (and what’s left over) gives you a more accurate picture for the accounting department to report on warehousing and fulfillment costs. Just estimating what your inventory stands at could pose a major rick to the profit reporting you do each quarter. Real-time metrics work to help catch errors immediately so you don’t experience extra downtime scoping out a problem.
How Real-Time Inventory Interacts with Shopping Cart Stock and Low Levels
Online merchants have to do everything possible to maximize their results, especially in these highly competitive times. And a great deal of attention is given to online marketing, special sales, social media, and other popular ways that retailers gain new business. But many companies fail to give appropriate attention to the ways that they can increase their conversions from visitors that are already on their website. And even less attention is given to “out of stock” scenarios.
Low Levels Have Become an Expected Norm
Unfortunately, the most widely used practice of dealing with low levels has been to notify customers during their online shopping experience that a particular item is currently out of stock. And sometimes an accompanying note to “check back soon” is placed on the web page, as if this will somehow magically attract the prospect back to the site at a later date. However, when people encounter the dreaded “out of stock” notice, they likely hit the back button and attempt to find a competitor that has the product or a similar product in stock. Out of stock items then become a serious “missed” opportunity.
Real-Time Inventory Helps Minimize Out of Stock Losses
Thankfully, new advances in ecommerce fulfillment software allow for innovative ways of handling out of stock items in order to minimize loss of business. In essence, they treat all items as if they are in stock, allowing customers to add to cart and complete some sort of checkout process despite the fact that some or all of the items are technically “out of stock”. The key here is that they allow an online merchant to collect contact information so that their sales team can follow up immediately in order to speak with the customer directly about the out of stock items.
Use Incentives to Close the Deal
With contact information and the ability to follow up with the customer directly, you’re armed with all you need in order to turn this potential lost sale into a home run. Instead of losing the business, you can offer to give the customer some sort of incentive in order to “wait” for the product to be replenished. This can come in the form of a percentage discount off of the product cost, free or expedited shipping, or anything else that you can think of to help minimize the disappointment. And the mere fact that you are proactively contacting them helps forge more of a relationship that can easily translate into further purchases down the road – because most of your competitors aren’t providing service to this extent. So think outside of the box when it comes to out of stock items and you may find that you’re able to further differentiate yourself from your competition.
Remember – Real-Time Inventory Doesn’t Guarantee Success
Just because you implement a real-time inventory system doesn’t mean that there won’t be mistakes, so knowing the potential risks will better help you avoid any potential pitfalls. For example, theft of product, mis-pick errors, damage to product and recording errors (at the receiving or picking/shipping level) can throw your inventory levels out of balance. Strict adherence to processes and procedures is critical to the success of this type of system. In particular, pay close attention to controls over the receiving process, since an error in this department will only compound problems further on down the sales process. Furthermore, a scheduled quantity of cycle counting will help assist you in more proactively catching inventory discrepancies.
Here’s a few tips to streamline the processes and remove some of the clutter.
- It all starts with a solid inventory management system that speaks intelligently with your online shopping cart, if applicable. Inventory management systems have a multitude of functions that automate mundane processes.
- Utilize the reporting features of your inventory system to view up to date information on which SKUs are high active and which items seem to be stuck on the shelf. Getting rid of some of the dead weight will help reduce some of the workload and clear some of the inventory you’re carrying in the warehouse.
- Run a profitability analysis on your items. Growing your number of items can definitely have a positive effect on growth of sales, but it doesn’t necessarily equate to increased profits. Make sure that you’re carry products that are profitable and removing items that don’t pull their weight.
- Use the data from your inventory turn to place high moving products close to your picking and staging area, thus limiting the time to pick.
- Oftentimes, there are programmatic ways that you can make bulk website updates (description details, etc.). Check with your technology team or consultant for ways to tap into this time saver, but make sure not to duplicate content on your site, which can jeopardize your keyword rankings in the search engines.
A lot of times, taking the giant leap forward into real-time inventory is daunting for growing companies. Outsourcing fulfillment is a way to tap into the real-time environment without having to make the commitment to purchasing new technologies and management of the additional requirements. Professional third party fulfilment companies specialize in all aspects of warehousing and distribution and will have the necessary software to bring your company from periodic to real-time.