The opportunity with forecasting and replenishment
I have a scenario for you.
Your new forecasting and replenishment (F&R) system is up and running.
You’ve navigated procurement.
You’ve successfully managed your stakeholders.
Your IT team have wrangled the data and set it up.
You’re flying.
An email then drops into your inbox, pitching an inventory accuracy tool. Your first thought: ‘Why would I need that with our new system?’.
It’s a natural question, as your inventory position will already be improving, considering you’re now making data-led decisions around replenishment.
There is a problem, though. One that you may not be immediately aware of until a few months after rollout.
Whilst you are making data-led decisions, and the system is working, your inventory accuracy isn’t improving, which is causing a knock-on effect for your replenishment.
A false positive
This is not uncommon, which isn’t a surprise considering that this is a perennial challenge for the industry. That being said, the question about why you would need an inventory accuracy tool is one I have been asked directly.
The challenge lies in the comfort that you are making data-led decisions. Whilst you are making those decisions, the data they are based on can be inaccurate.
Ultimately, your forecasting system feeds off in-store data signals, specifically your inventory position. Unfortunately, grocery retail (regardless of format) suffers from an inventory accuracy challenge. In fact, research shows that 60% of inventory records are inaccurate.
This is acutely felt in the fast-paced world of convenience retail, where over 160 million transactions happen daily in the US.
In this environment, theft, mis-scans, short deliveries, and misplaced items will wreak havoc on your inventory record. As a result, your system(s) are potentially making decisions on either overstated or understated inventory, leading to poor forecasting and inefficient replenishment.
As the old adage goes, you get out what you put in.
Evolution, not revolution
So, how do you improve your inputs?
It might be time to revisit that email …
But all jokes aside, as a convenience retailer, you typically have two solutions:
- Review and improve internal processes; or
- Look at a complementary technology solution.
The problem with the first option is that a manual audit, regardless of how thorough, is time-intensive and outdated the moment it’s complete.
This means that the most effective solution is additional technology. This might be hard to stomach, considering the collective effort that was involved in rolling out your F&R system, but there is light at the end of the tunnel.
The first thing you need to do is position an inventory accuracy solution as an evolution, not a revolution. You are looking to improve your forecasting process further.
In a previous piece for GCSF, I summarised the tools you can use and the potential of data-led solutions. The latter is key because if you can find the right technology that relies on foundational retail data (particularly sales and inventory), a big chunk of the preparation work for the evolution has already been done.
The data your IT was working on to set up your F&R system is the same data you can use to trial an inventory accuracy tool. Reducing the time and resources required to get started.
When it comes to the additional costs of a complimentary solution, the answer is usually, ‘how long is a piece of string’. However, in a world where margins are razor thin, you need to maximise your investment, which is where data-led solutions tend to be very strong.
Focus on tools that aren’t capex heavy, are scalable, and focus on the precision of detecting inventory inaccuracies.
If you can do that, you will have a more accurate inventory record that provides the right fuel for your F&R system.
