Out of Stock? Hoarding is Not a Solution
Investing time and money in making products available is more important today than ever before, thanks to the ripple effects of COVID-19. Capacity constraints and delivery agents have been upended, and product availability is at risk. Rising digital trends and changing consumer behavior and spending habits have also led to an urgency to respond to market conditions quickly.
Customers no longer tolerate out-of-stock items and long waiting times for restocking. A recent Marsh McLennan study reveals that 32% of customers are willing to forsake an out-of-stock product, and 12% will purchase a similar product from competitors.
As e-commerce competition heightens, the fight to retain top of mind with customers will intensify. Retailers who raced to increase or "hoard" orders in fear of stock-outs are absorbing rising costs to get products on shelves. This is not sustainable.
To gain market dominance, organizations must go beyond the traditional playbook. Here are three sets of actions to consider:
1. Harness logistics innovations to plan and forecast demand. Organizations rethinking their business strategies are moving to the next phase of pandemic planning, transitioning to identifying emerging trends.
There is a shift to move away from just-in-time and adopt the just-in-case approach. The question remains: how do retailers plan the right safety stock levels to protect them from supply chain fluctuations?
Imagine what's possible without real-time commitment. Organizations can harness logistics innovations such as digital twinsto address business needs accurately, simulating disruptions and managing risks. Through advanced analytics and artificial intelligence, organizations can optimize supply chain inventory management and help the team come to a decision quickly without having to experience the real thing.
Plan better with data. Organizations can rely ondata analyticsto gain valuable insights into market trends and drive inventory scenario modeling and better decisions. Organizations can also stock up on popular products ahead of predicted demands or potential risks.
2. Rethink your inventory strategy. To meet customer demands with agility and speed, organizations should constantly examine their inventory management strategies. Here are five key actions:
- Adopt a multi-sourcing approach. Procurement leaders are moving away from single product providers and diversifying suppliers across regions. Localizing supply sources closer to demand reduces exposure to delivery delays and bottlenecks.
- Augment inventory and expand pockets of inventory within the supply chain by prioritizing products. Reduce costs with strategic inventory and pick-up locations.
- Avoid unnecessary costs that could come with overstocking. Organizations should weigh the priorities of their goods and rethink their pricing strategy to move the products.
- Update fulfillment models—such as urban fulfillment centers—with automation to support the e-commerce hub-and-spoke model.
- Modernize your supply chain environment early with technologically driven partners to stay ahead of the curve.
3. Keep your supply chain resilient and sustainable. The benefits of being resilient are the credibility and loyalty gained in meeting changing customer demands. Similarly, organizations focused on sustainable practices can avoid having their products penalized by regulators or unloved by customers.
The conventional one-size-fits-all method is no longer sufficient to succeed in today's world. Organizations need to invest in technology, constantly rethink inventory strategies, and adopt sustainable practices to gain long-term customer loyalty.