​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.  ​

It's no secret that COVID-19 has both been highly disruptive for both commerce companies and consumers that identify with them.  Starting with the identification of a new type of virus by Chinese Authorities on January 7, 2020, to a rapid spread (within a matter of weeks) to Thailand, South Korea, Iran, Italy, and the United States, it was clear that the Novel Coronavirus was moving quickly and impacting the health of many across the globe.  On February 11, the World Health Organization had labeled the disease 'COVID-19'.  By March 11, 2020, as the world grappled to learn about not only about the source of the virus and rapidly began efforts toward finding a vaccine, the World Health Organization declared the outbreak a global pandemic.  

The outbreak of COVID-19 has had an indelible impact on our culture and resulting behavior.  How we work, travel, socialize, and shop have all changed – and we are all questioning what the new normal will be as states and businesses reacclimate and reopen for business.  In the specialty and department store retail business shoppers have become accustomed to shopping online, however, the percentage of online business – although increasing year over year – still pales in comparison to brick and mortar sales; by NRF statistics, they are only 10% industry wide.  

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. ​

The retail industry has been one of the hardest hit by the global pandemic know as COVID-19.  Retailers have lost significant revenue.  The question for many retail executives is how to maintain business continuity and manage the reduction in cash flow while many fixed costs remain.  The effects of a shutdown lasting into the summer may mean that stores that have shuttered their doors temporarily may in fact never reopen.  This may mean a much smaller store base for many retail chains.   Given the future of a smaller sized business, retailers are looking at key steps to improve cash flow or just as important to preserve cash.  The key steps retailers are taking include changes in inventory management, furloughing some employees and potentially evaluating the use of their revolving credit facilities to bridge the cash gap until stores can reopen.

The Ascent team is acutely aware that retailers are now striving to cope with unexpected and unprecedented disruptions across People, Process, and Technology in their businesses. One segment that has been hit particularly hard is the Fashion Retailer, who judiciously times merchandise arrivals with meeting seasonal consumer demand, then has an urgent need to transition out of product as the next season commences. These companies are now faced with unique challenges as a result of the impacts on their supply vs. demand by the COVID Pandemic.

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

Many organizations are currently running in a mode that is utilizing at least some, and in many cases, quite a number of the components of their Disaster Recovery / Business Continuity Plans.  For Retailers, however, this time the typical DRP/BCP scenario has been flipped.  The data center, cloud platforms and network are intact, but in most cases, the brick & mortar selling locations are closed or restricted to pick up only.  The supply chain is disrupted. The network, online transactions, eCommerce/BOPIS fulfillment, and related security and performance issues, are primary concerns.  Some of the DRP/BCP components implemented may have worked better than others, and now is a good time to identify the components that need to be updated in the plan, based on the lessons learned.

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.

With important health and safety regulations around COVID-19 impacting the Retail industry, many Retailers are struggling wondering how to mitigate the impacts they are seeing to a limited supply chain, store closures, changes in consumer demand and behaviors, and furloughs and reductions in force.  Many are concerned about business continuity, and are having to put strategies in place as quickly as possible.  Some are turning to government loans to create cashflow for payroll.  Others are doing their best to continue with limited channels and budget cuts.  It’s both an uncertain and difficult time for most, and we are here to help with ideas and ways to generate revenue and not only stay viable during the crisis, but also have a strong infrastructure with the ‘new normal’ post-COVID-19.

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

I remember when I was young and would wait by the mailbox during the month of November for the Sears Wishbook to arrive.  My brother and I would grab it and promptly run inside, racing through the pages to see the gifts to select from.  We'd even go as far as earmarking pages in the Wishbook for our Santa letters to guide the big man to the toys were at the top of our lists.  The Sears Wishbook was, after all, the source of truth for all holiday gifts.  ​

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.  

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.

​A formal and managed process to system alignment will ensure that the business and IT teams remain in lockstep and can agree on the benefits realization expectations. Formally driven “change” also helps to ensure understanding across the organization, the core stakeholders, and the ultimate stakeholders, the customers. All too often IT is viewed as an island and the business carries on running the day to day, with limited understanding of what each of the groups is truly doing.
As a leading practice, each leadership team should set and measure the speed to benefit expectations of each project within an overall program. A “quick win” can turn out to be a stepping stone to short-term benefits realization, however they need to be weighed against the overall vision in order to ensure it is not viewed as a “throw away” exercise from which the business sponsors see little benefit.