Why is multi-channel inventory management a challenge?
We have started LA Software as a supply chain software company in 2004. Since 2004, we have been challenged by hundreds of companies and warehouses from various industries. Nowadays, the trend is multi-channel inventory management for retailers. When we have a conversation with a retailer, usually the question comes to multi-channel inventory management.
The questions were started about how to manage the inventory across multiple channels. But now the questions are all about how to manage inventory across multiple channels real-time. Real-time is the key point for retailers.Retailers want to download their orders and push their inventory to all the channels on time and real-time. If they can not synchronize their inventory and warehouse with all the sales channels, they will face overselling or misselling sales opportunities.
The inventory is really received into warehouse?
Not always! The global village allows us to handle our inventory anywhere in the global supply chain. Today, retailers can manage their inventory in 3PL warehouses, Amazon FBA and their own warehouses. And possibly, the inventory is spread out all the world, if not today, sure it is gonna be in the near future. In order to start multi-channel inventory management discussion, we have to accept that inventory is everywhere in the global inventory network.
All your inventory is connected!!!
The ideal system, for a global retailer, should connect all the inventory under the same umbrella. You may have 3 items ordered in Amazon and all should be delivered from different warehouses in your global inventory network. Having all your inventory under one umbrella is not enough to manage the connected inventory. The orders are dropping from all the channels (Stores, Amazon, Shopify, eBay etc). The challenge is to decide which warehouse is going to ship which product and when? What is going to be the optimum cost of having a globally connected inventory network?
Channels share global inventory!!!
When you have 2 brothers and 2 chocolates on the table, it starts right after. All the channels are trying to get and sell your globally connected inventory. Who is going to be served first? Who is more precious?
Oops!!! We have more backorders.
When all the sales channels start selling the same globally connected inventory, if you do not have a perfect system to manage the process, backorders will arise. You have 3 options to overcome backorders in your global inventory network and multi sales channels.
Buffer is the safe way.
Do not panic, you can estimate the demand and fluctuations every day and from all the channels. And our vendors have unlimited inventory in their warehouses. So, let’s put a safety inventory in case we oversell. Yes, it is sorted out. No need to calculate the capital that we tied to our safety inventory.
Just allocate inventory for each channel.
The best way may be allocating a separate inventory for each channel. So all the channels can sell their inventory and there will be no more overselling. Yes, that is a good solution. No need to calculate the missing sales opportunity in the channel which is out of stock. And the inventory that we allocated to that underperforming channel does not mean anything to us.
Or, just automate it.
Use an automated inventory management system which can manage your global inventory and multiple sales channels. With the real-time information coming from all the channels, carriers and warehouses, new generation inventory management systems are capable of automating all the fulfillment process.