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The power of perpetual inventory

The power of perpetual inventory

Why optimal inventory management is critical to meet customer demands and reduce costs.

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Technological advances are creating unprecedented opportunities for retailers to connect with their customers over a variety of mediums. Offering an ‘omni-channel’ shopping experience is now the expected norm in today’s competitive and fast-paced environment.

However, successful omni-channel retailing needs to be supported by a modern approach to inventory management. It’s vital for retailers to know what stock they have, where it is, and to make sure that information is accessible throughout the business, and as necessary, to customers.

Despite this need, inventory management is one of the most underinvested areas in retail. Many retailers rely on legacy systems that do not provide in real time or an accurate way of knowing what stock they have on their shelves, in the back rooms, in transit and at the warehouse – that is, perpetual inventory – resulting in misdistribution of stock.

Only a few of the top 20 retailers in Australia have ‘perpetual inventory’ – a near real-time and ubiquitous approach to inventory management.

Challenges of poor inventory management

A lack of accurate and up-to-date inventory management has ripple effects through all aspects of a business. Some businesses have detailed plans for a new omni-channel operating model, but cannot enact the plan due to poor inventory systems. Here are some other challenges of poor inventory management:

  • Visibility issues – For many retailers, manual stocktakes are the only time when they know what stock they have and where it is in their network. Without the capability to instantly see and update inventories, retailers miscalculate their online inventory with stock that isn’t actually available. This can lead to the customer ordering items that are not available and the consequential actions of having to inform customers that they are unable to fulfil their orders and potentially issue refunds.
  • Hidden costs – Online sales often involve hidden costs the retailer was not aware of. For example, as goods move through the value chain, their cost can be inflated due to duty, freight or handling charges. Without accurate inventory management, these costs are not fully managed and the true item profitability is unknown.

Impact to consumer trust

Consumer trust is paramount to the ongoing success of any retailer. Customers expect that when an order has been placed, it will be available, in the correct size/style etc., and ready for collection or it will be delivered at a convenient time and location. Every time a customer’s order is unfulfilled, it dilutes trust in the brand. This is why perpetual inventory systems are so vital.

Download the brochure to find out how KPMG can help you through the process of evolving your inventory management, and set you up to deliver an effective omni-channel experience for your customers.

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