Inventory Optimization in the Demand-Driven Supply Chain

Retailers must revisit their supply chain design to get a handle on inventory, with an increased focus on understanding demand behaviors and the actual cost to serve.

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By definition inventory optimization is the process of scientifically determining the right inventory levels across the supply chain. Sounds simple enough. Yet, for today’s retailers, managing their inventory in a customer-centric, omnichannel world is a challenge. 

 What might sound like a customer service complaint to the average shopper is now increasingly a supply chain problem. Why is the pair of shoes they’ve been eyeing online out of stock at their local retail location? Many retail supply chain teams are still working to find the answer. A separation of e-commerce and brick-and-mortar inventory is one factor.

“As they launched their direct-to-consumer business or their e-commerce business, many of those retailers set up different silos of inventory—this inventory was for e-commerce and that inventory was for brick and mortar,” explains Karin Bursa, executive vice president at Logility. “The bad behavior if you will, or the bad habit of creating these silos of inventory, has created some interesting challenges for retailers in that they could be out of stock at a retail store and be sitting on inventory for their e-com business.

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