​Is Inventory all that it's cracked up to be?
The hot topic in recent industry publications is a categorization of inventory as a liability rather than an asset.  For retailers, inventory has been the largest single “asset” category on the balance sheet, attributed with the potential to add future value for a company.  The concept of inventory as liability points to the recent risks associated with procuring inventory, only to have it reside in the wrong location to get to the consumer in a time frame equal to expectation.  Can you ship from another location to get there in time?  How much does that erode your profit, both in shipping expenses and additional labor costs?  What’s the opportunity cost of having those dollars invested in that specific product vs. other items that turn faster or drive more profit per item?  Can your cash flow model cover the cost of getting the inventory placement wrong? ​

Historically merchandising teams have seen inventory as a liability if it was aged or turning slowly.  Increasingly, consumers see it as a frustration if it is not available.  Driven by heightened anxiety during the pandemic, shopping has become 'intentional' not 'casual', inextricably bound to the expectation that product will be available for pickup or shipment immediately.  

The World is moving Direct to Consumer
Along with curbside pick up and ship from store, direct from vendor drop ship is becoming a reality.  According to one major vendor, Adidas, DTC is expected to represent 50% of its revenue by 2025.   Retailers will need better mechanisms to tie into these fulfillment streams, accurately predicting and aggregating demand.  Systems and processes will need to embrace an alternate inventory model that factors in direct to consumer 'competition' from the manufacturer.  Technology and integration capabilities can facilitate retail and manufacturing capabilities to shorten lead times and get product to the consumer faster.  ​

The inventory purchased months prior to the COVID-19 pandemic was meant to support store sales as well as online. Some of this inventory could be delayed in customs, some may not have left the manufacturer, and some could be sitting in the DC meant to be shipped to stores.  Much of this merchandise is seasonal.  Typically, 80% of merchandise is fashion.  By the time the stores open, it will be obsolete. ​

 How to deal with this inventory obsolescence efficiently will be key to maintaining profitability.  Some options retailers may be considering to manage this inventory are:

• Sell off to jobbers
• Markdown and sell in full price stores
• Send to outlet locations
• Pack and Hold

Regardless of the choice, or combination thereof, there are factors that must be considered.  Each option has an impact to Gross Margin Return on Investment (GMROI); and it will take a precise strategy to ensure the best approach is undertaken to maximize profit.  For example, retailers will have to weight a devasting hit to margin by selling to a jobber for pennies on the dollar; or considering a pack and hold scenario, if appropriate, that will slow turnover also affecting GMROI.  Taking markdowns to liquidate the merchandise will erode margin as well as have an impact on the stores as discussed below.  If a retailer has an outlet strategy this could be an option, but may impose assortment challenges.

In order to emerge well-prepared for post-COVID growth in the evolving economy, retailers should look to refine future state processes, systems, and people, improving efficiencies in a fluid yet stable way.   We hope you stay safe in your businesses and with your families, and  we will be here to support you as you work to bring your supply chain into "the new normal".  For more information, visit us at www.ascenterpsolutions.com.

Co-Authored by:

Donna Lekites and Claudia Ferrell
Ascent Enterprise Solutions

Internet and web site traffic is increasing for shoppers now buying online as stores are closed for shopping, which is placing higher demands on the platform to provide the throughput required.  Having a cloud-based solution in a data center backed by GCP, Azure or AWS provides for efficient scalability.  As the online channel begins to represent a larger share of the business, network performance management and security detection and response solutions are required to protect both the consumer and the business.
Efficient and responsive order management solutions will require a robust, low code / no code, reliable integration platform to implement process automation, identify inventory availability, process payments, provide order status visibility, and ensure end-to-end data integrity for online orders, whether shipped to the customer from the fulfillment center, drop shipped by the vendor or picked up at the store.

Today, with 80 percent of revenue growth hinging on digital offerings and operations by 2022, IT leaders should continue transforming their operating models, according to KPMG research.
Companies that continue to invest in their digital strategy will emerge from this pandemic as a more competitive organization. Sound models that incorporate the best people, processes and technologies remain critical in good times and bad.
When this period ends, there is going to be a significant upsurge in consumer spending, and CIOs will want their organizations to be in position to take advantage of it.  Now is not the time to put significant technology initiatives on hold.  The companies that fall behind on the digital curve because they have cut back IT spending too deeply will be in trouble.
Technology, done right, enhances productivity and efficiency. Investing in these sorts of systems enables companies to do more with less. Moreover, with so much uncertainty, it may even pay to accelerate, not just maintain, investment in automating costly processes and providing visibility and flexibility throughout the entire supply chain.
​The situation presents both a challenge and an opportunity for businesses. Customers will find a way to meet their needs digitally, through their current Retailer or another company that does a better job. This will widen the gap in performance between digital leaders and laggards, generating better results for customers, employees and shareholders.

We see both the confusion and the concern, and want to help.  That's why we've offered free consultations through the month of April to help our friends in the industry get technology and processes in place immediately to see them through the crisis.  Along with our offer of a free consultation, you’ll see our team at Ascent building out a series of thought leadership products over the next few weeks, including:

• Supply Chain impacts during COVID – How to find the right balance!
• Financial strategies for Retailers to streamline cost and revenue during COVID
• Technology strategies for the CIO to mitigate the internal and external demand being place on infrastructure
• Channel strategies for Retailers to keep customer loyalty and engagement high

Fast forward 35 years, and it's incredible to see how much has changed.  We have entered the age of digital transformation for commerce, where the old Wishbook has been replaced by online catalogues, augmented reality on social media platforms, and personalized experience-based shopping  in many stores today.  What hasn't changed, however, is that the customer is still the King (or Queen), and companies are using new technologies to engage and entice the inner child in all of us.
As a partner in a leading consulting company (www.ascenterpsolutions.com)  in the commerce industry, I am constantly engaging with our partners, customers, and other industry specialists to stay connected to key trends and changes in technology each year, and I wanted to share some of the things we've seen at Ascent that are making a difference for commerce companies in their holiday strategies.
1.  Companies are leaning into holiday shopping with earlier sales.  2019 has been an interesting year to see the growth of shopping holidays like 'Singles Day' and more major brands offering 'Pre-Black Friday Specials'.  We've seen industry giants, like Walmart, Amazon, and Best Buy sending out daily specials throughout the month of November.  In fact, the industry is showing larger percentages of consumers (even up to 40%) starting their holiday shopping even before November, and while it's (admittedly) difficult to see holiday sales starting before Halloween, consumers are willing to spend earlier and earlier to get that best price on those gifts that their loved ones are hoping for.  

3.  Companies are also focusing on digital marketing strategies to drive new opportunities to connect with customers, and the business (not IT) is driving the sleigh!  Consumers love social platforms, and are constantly engaging with family and friends on Facebook, Instagram, Snapchat, and even TikTok (which is quickly gaining momentum among Gen Y and Gen Z shoppers).  Companies are spending money to advertise on these platforms and are offering incentives for reviews, feedback, and other types of engagements.  Click through and conversion rates are being measured to help customers understand the effectiveness of campaigns for these platforms as well as ancillary sites.  This, paired with more advanced CRM and loyalty capabilities, are enabling companies to not only better understand their customer, but create personalized experiences to connect with them in a more tailored and meaningful way.  
It's certainly an exciting time to be in the industry.  While there are other strategies out there helping companies find success and growth during the holidays, promotional focus (and event timing), enhanced and efficient technologies (like OMS and CRM), and targeted digital marketing and content strategies are leading customers to sites and stores in new and innovative ways, and creating exciting experiences and building rapport that will last long after the season.  At Ascent, we hope you have the best of holidays, whether a commerce-driven company, a shopper, or one benefitting from the generosity of a friend or colleague.  And just like that kid rushing through thethe Sears Wishbook, we hope that your hopes and dreams are recognized not only through 'getting' those things you dream about, but through sharing and kindness shown to others this Holiday season.

Whether orders are placed from a mobile device, a laptop or macbook, a call center, or within the four walls of a store, the modern order management system (or OMS, sometimes also referred to as a DOM) provides the framework to receive, prioritize, consolidate (or deconstruct) and route the order to the appropriate fulfillment center for rapid delivery to the customer. It can satisfy fulfillment requests for B2B and B2C product, and stands as the primary source for status from time of order placement through delivery of the product. Salespeople and Call Centers rely on Order Management systems to provide updates to customers, and also handle returns. Distribution centers rely on Order Management systems to consolidate orders and initiate picking requests from within their Warehouse.  And the end consumer can rely on the Order Management system to expedite the fulfillment process to ensure they're able to pick up or receive the product even up to the day that the order is placed.

How an OMS drives Revenue
But cost savings (alone) aren't enough. OMS's should be generating revenue as well. By exposing inventory across channels, the 'endless aisle concept' is now available to eCommerce sites, brick and mortar stores, and even end consumers. And suppliers and vendors are also jumping in to expose their inventory for seamless fulfillment and tighten up the supply chain process. In fact, we have seen more vendors participation in drop ship direct to customer through integrated OMS functionality in 2020 than ever before. By exposing inventory across channels through a single source, the OMS is driving greater sales volume, and reducing the notion of stock outs dramatically. But that's not all - as the OMS supports a cross channel view of inventory, it also integrates all of the customer's shopping behaviors and trending for a level of visibility that the call center or salesperson can view for upselling based on previous purchase history across channels. While traditionally a function of marketing and CRM, this capability brings functionality direct to the person (or system) interacting with the end consumer to ensure a personalized experience, regardless of where they do the bulk of their shopping.