Executive Briefings

Allocating the Right Stock, Place and Time to Retail Supply Chains

The days of selling within seasons are long gone; sales periods that once spanned months have now shrunk to weeks. This "multiplier" effect presents retailers with huge challenges, because shoppers want the latest, most fashionable products immediately.

So how do retailers ensure that high-fashion products with short lifecycles are placed in the right channels, in the right quantity and replenished carefully to minimize end-of-season markdowns?

Retailers today commonly push products quickly into stores using a "scattergun" approach. When new products land in distribution centres or warehouses, 60 to 70 percent are often sent directly to stores. Sizes and colors are distributed evenly, no matter where the stores are located and regardless of the buying patterns of local shoppers. This manual allocation process has a single goal: moving merchandise rapidly. There are benefits to this approach in that trendy products are available when consumers demand them, and retailers know that at least some of their merchandise is reaching customers.

But this approach also has a downside: where merchandise fails to sell as hoped, costs accumulate because of the need to transfer stock or mark it down. Large quantities of misdirected merchandise also interfere with retailers' ability to turn over inventory and make space for new products. This is where intelligent allocation software can make a huge difference.

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So how do retailers ensure that high-fashion products with short lifecycles are placed in the right channels, in the right quantity and replenished carefully to minimize end-of-season markdowns?

Retailers today commonly push products quickly into stores using a "scattergun" approach. When new products land in distribution centres or warehouses, 60 to 70 percent are often sent directly to stores. Sizes and colors are distributed evenly, no matter where the stores are located and regardless of the buying patterns of local shoppers. This manual allocation process has a single goal: moving merchandise rapidly. There are benefits to this approach in that trendy products are available when consumers demand them, and retailers know that at least some of their merchandise is reaching customers.

But this approach also has a downside: where merchandise fails to sell as hoped, costs accumulate because of the need to transfer stock or mark it down. Large quantities of misdirected merchandise also interfere with retailers' ability to turn over inventory and make space for new products. This is where intelligent allocation software can make a huge difference.

Read Full Article