Allocation and Replenishment for       Omnichannel Retail
  • Anuradha Kapur

  • 3 minutes

  • 8 April, 2022

Allocation and Replenishment for Omnichannel Retail

As omnichannel retail becomes a steady trend, conventional allocation and forecasting can cost millions and appear to be rather tedious. The omnichannel approach demands proactive and integrated strategizing across all points of sales, responsive allocation, and timely replenishment. The growth of omnichannel retail has therefore created new challenges for retailers, especially in allocation and replenishment. Accurate decisions to meet evolving customer demands can be taken by leveraging past data, customer buying patterns, competitors’ tactics, and seasonality with automation and analytics-based merchandising solutions. 

Forecast right down to the store level

It is important to forecast demand across multi channel retail accurately to ensure that the right quantity of stock is allocated to the right warehouses and stores. Predictive analytics helps determine the timing of replenishment, size of the consignments, and frequency of allocation. 

Analyze Patterns of Online and Offline Demand 

To determine allocation and replenishment accurately, gauging customer demand patterns is critical. Retailers must consider factors that decide the quantity, timing, and motivations of customers’ purchase decisions. As compared to the traditional methods of analysis, data-driven decision-making helps in easy, instantaneous, and accurate demand analysis. New-age merchandising solutions help retailers drill deep into product & size level granularities to predict the exact style-size combination to serve customer demand across both offline and online channels.

Right Allocation for Ideal Demand Fulfillment

Once the pattern of demand is identified, it has to be backed up with the right allocation. In case of a sudden spurt in demand in a particular market, in-season reallocation can be optimized through inter-store and inter-warehouse transfer.

Likewise, using Increff Distributed Warehouse Inventory Optimization solution as part of your pre-season allocation strategy helps maximizes fulfillment from local warehouses. It enables retailers to provide cost-effective fulfillment by reducing the shipping distance. Delayed order delivery is one of the major reasons for returns, fulfilling orders faster from regional warehouses helps reduce this significantly. It increases margins, provides operational efficiency, and minimized shipping costs immensely while ensuring the highest levels of customer service and repeat purchases.  

Turn on Auto-Replenishment 

An ideal merchandising solution enables retailers to set auto-alerts to notify when the quantity of a fast-moving style has reached below a certain level and needs to be replenished. While setting the alerts, it is prudent to consider the average lead time and keep a provision for supply-side delays. In case a particular product or style is unavailable, the merchandising solutions can suggest the next best alternative which can be considered for replenishment. This helps capture maximum sales and avoid loss of revenue due to the non-availability of goods.

Sales of bestsellers (e.g., plain white T-shirts) are not seasonal and their replenishment can happen throughout the year. If sales of some styles that are in limited quantities, pick up suddenly during a season, then alternatives styles can be replaced to ensure consistent sales.

Use Markdown Management to Boost Sales and Improve Margins

Throughout the season, retailers expect crests and troughs in demand. Whether it is the end-of-season sale or festivities, retailers must anticipate demand accurately for the right inventory management and to avoid over or under-stocking of inventory.

At the end of a season, retailers usually sell off the leftover stock at high discounts so it can be replaced with new stock. A number of factors like True ROS™, Ageing & Cover, Health of stock in a store, etc,. are critical factors to consider in determining the right percentage of markdowns. Since omnichannel can complicate the markdown decision immensely, retailers cannot rely on excel sheets for decision making. They need to implement the right markdown optimization tools to accurately access discounting percentages, ensuring maximum sales and high profitability. 

Markdown management is also useful to expedite the sale of slow-moving stock during the season. For this, an appropriate discounting percentage must be applied that avoids causing excess loss or devaluation of merchandise. Discount levels can also be manipulated based on the store-level customer demand for a particular product. 

Manage Returns Proactively 

Omnichannel commerce increases the complexity of returns as customers who buy online often prefer to return the goods offline at physical stores. Brands, therefore, have to facilitate easy returns management by putting in place quality checks and product sorting right at the store level, or at a nearby fulfillment center. Finally, they are required to expedite reverse logistics to the warehouse so that the merchandise is made available for resale as soon as possible. 

As is evident, omnichannel adds to the need for proactive strategizing, better forecast and demand anticipation, greater demand fulfillment from regional warehouses, and accurate inter-warehouse transfer to meet customer demand, helping capture maximum sales and boost profitability. For all this, retailers need the robust support of automation and predictive analytics provided by an ideal merchandising solution.

Author: Anuradha Kapur

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