Easing Pressures on Demand Planning to Avoid Overstocking

Here's how RFID can help retailers improve their supply chain visibility by investing in RFID technology and the associated benefits.

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Supply chain visibility is a key priority for retail executives, and sustainability is fast becoming an integral part of the retail landscape, both at the store front and behind the scenes. When integrated correctly, it can result in retailers being able to ease the pressure on their already-stretched supply chains. Let's look at how RFID can help retailers improve their supply chain visibility by investing in RFID technology and the associated benefits when it comes to sustainability and day-to-day operations.

The Green Agenda

Professionals in the retail industry are prioritizing how they do business more than ever before and are seeking to achieve their objectives by focusing on improving their Environmental and Social Governance (ESG) impact. With KPMG finding that 53% of organizations plan to increase their focus on sustainable sourcing, it’s clear that this is now a priority that cannot be overlooked.

In a world increasingly conscious of its environmental impact, businesses are under mounting pressure to take sustainable practices seriously. For retailers, this often means taking a closer look at their inventory management processes. The improved accuracy that item-level RFID brings allows retailers to effectively manage their on-hand inventory and supply chains; significantly reducing the need for safety stocks. However, with greenwashing an ongoing concern, having the right data is key so that decisions are more informed, meaningful and backed up by conclusive facts.

The Overstocking Status Quo

In the fast-paced world of fashion retailers, one persistent challenge has been the lack of visibility. However, due to unpredictability, retailers still react by overstocking inventory to minimize the risk of losing a sale due to merchandise being not available. Such overstocks result in a financial toll and while retailers have used this strategy in the past it’s a costly one, especially at a time when the global economy is under pressure and the costs of retail operations continue to rise.

Supply chain sustainability and the pressures faced by decision-makers can be improved by investing in the likes of RFID technology to easily track the provenance and the movement of stock in real-time throughout the supply chain, from the factories, warehouses and distribution centers to the store stockroom. Increased inventory accuracy can also be used with intelligent self-learning algorithms to create smart refill suggestions of what should be replenished not only to the sales floor but to the entire store as a whole. By improving the management of stock already in stores, RFID-backed refill suggestions help prevent products from getting stuck in the stockroom and, therefore, increase their probability of being sold and not ending up as waste.

A lack of transparency is the cause of many issues faced by retail organizations today, and with consumers now actively looking for brands that provide this, retailers who don’t offer visibility are at a huge disadvantage.

Easing the Pressures on Demand Planning

Demand planning is a core part of inventory management that aims to maintain resilient retail operations in the face of demand fluctuations, whether that’s supply chain related, as has been more common recently, or the more traditional seasonal fluctuations. For retailers, every item sold counts and they can ill afford to not be able to fulfill an order or for stock to gather dust on the shelves. Employee workloads can also be impacted if demand planning does not successfully take place, as they have to deal with unsatisfied customers or excess levels of stock. With RFID and other technologies available to retailers today, it simply isn’t necessary to overstock, and the alternative is retail businesses that are optimized, agile and resilient in the face of an ever-changing operating environment.

Adopting RFID

The question for any retail manager must be: Is it (still) right to purchase 150 t-shirts if you sell 100 of them just to be sure you have enough on hand? When RFID is adopted by retailers, they gain real-time insights into their stock positions and can increase inventory accuracy in stores to 98%; this enables brands to lower their target stock thresholds because they can trust what is listed in stores and, therefore, stock those sites in a more agile way. In addition to a sales uplift, retailers see increased product availability in their stores and can enable omnichannel programs. Omnichannel, or the practice of providing a seamless customer experience regardless of where the consumer wants to purchase a product, relies heavily on accurate inventory data, which RFID provides and retailers are nothing without a loyal and growing customer base.

The adoption of RFID technology not only revolutionizes the way fashion retailers operate but also leads to positive changes to the customer experience. With better visibility and data-driven decision-making, retailers can minimize overstock and safety stock levels and, ultimately, waste and inefficiencies in retail supply chain operations. Only keeping what is needed on the premises increases levels of efficiency and allows a retailer to send the correct product to the right store at the first time, which cuts down not only on products ending up as waste but also on the emissions and costs caused by transporting those products to the wrong places.