Inventory turns are critical. Especially for seasonal merchandise. If you have too many slow moving items, it leads to markdowns and a reduction in overall sales performance. But to maximize sales and turns, you need to ensure you have the right products, in the right place, at the right time. That means making sure you allocate stock appropriately across all your fulfillment locations. Let’s look at three ways to optimize inventory allocation.
1. Launch with less stock in stores
When you launch a new product, how much stock do you place out in stores? If you are like most brands and retailers, it can be as much as 70%. But as the season wears on, items sell in some locations better than others. And while demand forecasts can help, they’re never 100% accurate. There are always variables that are difficult to predict. Whether it’s weather events, entertainment events, influencer activity, political activity, natural disasters…. the list goes on. So rather than putting most of your stock out in stores, what if you took a different approach? Say it takes 10-20% of stock to fill the shelves. How much more do you need to launch with? 30%? 40%? 50%?
As long as your replenishment operations are efficient, you can wait. See how actual demand performs against your demand forecast, and prioritize replenishment where demand is high. That way, you’ll get more full price sales earlier in a season, and reduce end of season markdowns, or costs associated with pulling back unsold items. What else should you factor into your replenishment strategy?
2. Replenish based on source of demand, not source of supply
Digital order can be sourced from anywhere. It’s one of the great benefits of online sales. If you have slower moving stock in one location, you can use it to fulfill any orders. The challenge is, fulfillment of digital orders can make it look like an item at a particular location has healthy turns. When the reality may have big cost implications.
If the order was shipped from a location closer to the customer, delivery distance and costs may be lower. And the customer experience is better due to faster delivery times. In short, just because you ship an item from a particular location, doesn’t mean you should replenish stock to that location. What should you do instead?
Factor in demand. And make sure you replenish stock based on where your customers are located (the source of demand), not just where you fulfill from. And when it comes to demand, really savvy retailers are not just looking at actual sales, but unrealized demand as well. Let’s take a closer look.
3. Factor unrealized digital demand into demand forecasts
While digital sales are one indicator of demand, so is unrealized demand. What does that mean in the digital world? Think about the customer journey. Every time a customer comes to your website, and checks whether an item is available (in a particular color, size, or other variant combination), it’s a demand signal. Especially if they are checking local store availability. And if that item shows as being out of stock, it’s a lost sale. But how do you know the number of lost sales? And how can you factor that into your demand forecast so you can optimize your replenishment strategy?
With a modern enterprise inventory availability hub, like Fluent Order Management. One that captures an event every time a customer checks whether an item is in stock or not. That way you can understand the ratio of stock availability checks to orders, and use that data to improve your demand forecast accuracy beyond what you can with sales data alone.
Summary
When it comes to improving inventory turns, every small advantage helps. So consider how you can optimize your replenishment strategy. Launch with less stock in stores. Replenish based on the source of demand, and not just source of supply.
And if you want to take your demand forecast accuracy to the next level, factor in unrealized demand, with unrealized demand signals from a modern enterprise inventory availability hub, like Fluent Order Management. To learn more about how Fluent Order Management can help you improve your demand forecast accuracy and optimize your replenishment strategy, contact us today.
