The China (Sourcing) Syndrome

• the ability to buy the right inventory and have it on hand when the customer wants it, increasing top-line sales;
• reduced overstocks and the markdowns that go with them (for a typical $50M business, a 2 percent reduction in overstocks can increase annual profit by $200,000);
• improved inventory turnover and cash flow as buyers can schedule as needed rather than delivering early “just in case,” lowering carrying costs;
• enhanced staff efficiency, leading to significant labor savings; and
• reduced back orders (the cost to process and ship a back order can run as high as $10 to $20 per transaction; fewer back orders means lower operating expenses).

There's no single solution that will allow domestic retailers to fully recover the surging supply costs resulting from the rapidly evolving Chinese economy. It makes good business sense, however, to include accurate inventory forecasting as a key component of your solution strategy.