inventory optimization in retail
Portrait of author Tom Summerfield
Tom Summerfield

Customer Development Director (Global)

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Inventory optimization in retail is your silver bullet

By Tom Summerfield on September 30, 2020

As we approach the end of an incredibly turbulent year for retailers, businesses will now be turning their attention to some of the standout dates in the calendar. Of course, we’re talking about the Black Friday/Cyber Monday weekend, the Christmas shopping season and the increasingly-early ‘January’ sales period. 

This means we’re at a really crucial juncture – and the pressure is on for merchandisers, buyers, planners and traders to make the right decisions and end a tricky year positively.

There are two main problems that those working in these high pressure roles face – this year more so than ever. The devastating impact of 2020’s ongoing coronavirus pandemic and the temporary closure of high street stores has played havoc from a stock point of view. It’s resulted in huge amounts of terminal stock being left untouched in warehouses and shops; stock that is tying up valuable capital. How can teams shift this stock in the most profitable manner? How can they ensure they start the new year with an optimized inventory?

This leads us to problem number two: unpredictable consumer behavior. How can teams even begin to make the right decisions around products, quantities, sizes and styles when the future is so hard to predict? This year, customer shopping habits have, and will continue to, change at a rapid pace. This makes the time-poor merchandising team’s already difficult job all the more complicated.

Shifting stock profitably and predicting customer behavior

Over the coming months, the priority for merchandisers now has to be on acting quickly to solve these two core problems – clearing stock profitability and better understanding unpredictable customer behavior. 

For us, it’s about using your business’ data to its full potential to help drive invaluable insights and assist with efficient and effective decision making. Merchandisers today need to work in a more agile way when it comes to making calls on stock allocation, replenishment, buying and markdowns. While teams may know and trust the spreadsheets that power their day-to-day role – and with good reason, given the years they’ve spent perfecting these crucial tools – they simply don’t have the time to comb through every single cell, row and column to guarantee each decision – across every single item – is the right one. A new way of working is needed – and new technology is ready to power the future of merchandising as we approach 2021.

Use AI to power inventory optimization in retail

Inventory optimization with AI

Step forward AI-powered forecasting and inventory optimization. This has the potential to do the heavy-lifting and number-crunching for merchandisers, providing intelligent decisions taking into account all of your data – even factoring in sources like point of sale data and web data that merchandising teams normally wouldn’t have access to.

With a more holistic view of data from across the business, you can more accurately predict consumer behavior, even in these turbulent times, and get real-time, intelligent recommendations to make better decisions around buying, rebuying, allocation and pricing. This is all about augmenting and enhancing the merchandiser’s day-to-day role, taking away some of the more manual elements and freeing up valuable time which allows you to focus on strategy. For instance, this could be sending the perfect amount of a certain line to a particular store to capitalize regional demand, or it could be marking those trouble lines down to the perfect level in order to achieve the desired rate of sale, without giving away any unnecessary margin. In short, it’s about technology working in tandem with the human elements of context, creativity and empathy.

AI, of course, could not have helped retailers predict the impact of COVID-19. However, what it can do is ensure you’re making the right decisions in response to it. With AI, you can quickly and accurately leverage your data to improve forecasting and optimize stock and allocation during this important period. This will ensure you’re heading into the business end of the retail calendar in the strongest position possible, simply by being able to extract every last drop of value from your masses of data currently scattered across your business.

Take a step back and ask yourself some very important questions. Are you completely confident that you’re buying the right products, in the right quantities? Are you in a position to react to changing customer behaviors in an agile way? Do you have enough time to focus on planning and strategizing in your role as a merchandiser? 

If the answer to any of these is ‘no’, you need to rectify this while there’s still time. A failure to address the two main problems highlighted in this article will have a detrimental impact on your business’ health and how you’ll be able to operate over the coming months. The time for AI is now.


AI | Retail

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