The New Reality of Inventory Management

Along with our entire team, I recently had the opportunity to meet with a large number of merchandise and inventory planners at Direct Tech's User Conference. Over three days of presentations and networking, one thing became very clear: Inventory planning for cross-channel retailers has gotten complicated!

• For catalog retailers, it's no longer as simple as planning demand for a single mailing every four weeks.
• Brick-and-mortar retailers are trying to adopt direct retail planning techniques and vice versa.
• Online retailers have learned that inventory decisions have far-reaching financial consequences. As a result, they're rushing to adopt forecasting and purchasing processes.

It's a balancing act in every channel. Too much of the "wrong" inventory kills cash flow and hurts gross margin, but crucial sales are missed when you have too little of the "right" inventory. Meanwhile, all retailers struggle to accommodate demand and margin planning in response to ever-increasing promotional activity. The amount of details and complexity is overwhelming.

For 30 years I've advocated for more detail in the planning process. Now, however, I believe the best response to this overwhelming new reality is "less." Less data, less complexity, less time planning insignificant details. It's time to focus on the right planning, to free up your time and brain so you can make sound decisions that affect sales, profits and cash flow.

Catalog inventory planners, in particular, are at a "letting go" moment. The intricate planning processes that were so good for so long no longer work particularly well. It's time to simplify.

As these issues swirled at the conference, I found myself asking these veteran inventory planners, "Why do you care?" For instance, if you sold 1,000 units of a polo shirt last week, why do you care whether the marketing source was an email, an Amazon.com sale, a catalog, a store promotion, etc.? Your marketing team needs to care a lot since it's tasked with spending its marketing budget wisely, but why do you care? If you have a 26-week lead time reordering inventory from overseas, why do you care whether 12 percent or 13 percent of your business occurs the second week of May?