See the Future, Then Stock the Future

It’s a problem as fundamental as supply and demand: When supply fails to meet demand, you have to back-order. When supply exceeds demand, you have overstock. When it all works according to plan, pinch yourself; you may be dreaming.

Or, you may be one of the smart multichannel marketers who bucks business as usual to adopt a more realistic approach to the planning and purchasing of product. An approach called “continuous inventory” yields several benefits:
• more predictable demand streams;
• more accurate inventory levels;
• special vendor pricing;
• optimized shipping; and
• improved customer experiences.

The best part about continuous inventory is the resulting benefits are compounded by the number of channels within your organization — catalog, Internet, retail, a B-to-B division or any combination of the four. On the other hand, the costs that result from not implementing continuous inventory are also increased. You wind up with greater warehouse and shipping costs while losing sales and customers.

Sloppy Planning’s Price Tag
he key to continuous inventory is knowing what you need and when you need it, then ordering ahead of time so the products are in your warehouse when the orders come in. It requires you to forecast the demand stream for each channel while accounting for their uniquenesses.

But it’s more than determining what you need. You also must know when you’ll need the product to meet forecasted demand. If your timing is off, inventory is received at the wrong time, which leads to overstocks and back orders. In fact, estimates show that 30 percent to 40 percent of back orders aren't caused by bad forecasts, but by bad timing.

This is where the strength of your vendor relationships comes into play. It also illustrates the benefits of consolidated purchasing and shipping in the multichannel environment. Consolidating your purchasing across all channels allows you to take advantage of special vendor pricing and internal efficiencies, such as generating fewer purchase orders and centralized inventory control.