Why inventory and supply chain management will make or break you

A new age of Australian retail has arrived. If you’re not yet practicing agile inventory management, you are in danger of falling behind.

In a world where pretty much everything is available at the click of a button, customers have come to expect a good deal more from bricks and mortar shops.

People are no longer prepared to wait six months for the most recent product releases or new fashion trends — they anticipate a fresh stream of products available on the shelves, at excellent prices, daily.

Coupled with increased competition from leading international players such as Amazon, Kogan and ASOS, this enabled consumer has ushered in a new, more dynamic era in Australian retail.

The bigger ecommerce players and bricks and mortar retail chains are constantly evolving their distribution chains to be certain they have newest products suitable stocked in every socket / sales channel. With inventory turnover rates doubling in most businesses, they’ve developed sophisticated systems which can operate at very high velocity.

But what about your retail operation? How can you ensure you have the ideal stock coverage in every store? And how do you attain this without risking money flow?

Whilst personalised service, a distinctive’market’ product offering, and innovative in-store design might supply you with a few points of difference against the bigger end of town, now’s shopper will still walk-out if you do not stock the products they desire. Now more than ever, you will need to invest in agile inventory management.

Agile inventory management

In line with the Australian Supply Chain Institute, effective stock management”requires the orchestration of supply and demand data across the global supply chain.”

By increasing your agility to make decisions, you can eliminate excess inventory and possible shortages, saving yourself thousands, or even millions, of dollars in lost earnings.

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Agile inventory management is responsive and forward-looking, using information to accurately forecast trends and respond to demand in real time.


It involves three essential steps:

1/ Use data intelligence to predict demand & set stock levels

Step one is to create the systems that give you an informed view of potential demand for each of your products such as:

  • Revenue cycles — what would be the daily, weekly, monthly and annual sales trends you may observe / predict? How often does your stock turnover?
  • Client tastes — what are the latest trends and topics your clients are engaging with this could indicate new product opportunities?
  • Location / stations — how does need differ by store location? What about online vs. offline? What combination of stations do people use? Do they expect to have the ability to Click & Collect out of all of your store locations?

For all the above, list out the information sources that could provide you with a historical or predictive perspective of your marketplace. These don’t need to be costly or complex systems. They are sometimes practical ideas like monitoring social media for client trends and utilizing data from the internal systems. Just bear in mind that you should really be basing your choices on real time data not data from months or years ago. Whilst looking back at the past few years and months is helpful for spotting longer term trends, it’s risky to use this as baseline data to forecast customer demand in a volatile and fast-moving sector. Having access to live data from the point of sale and other business systems is important in today’s retail environment.


As soon as you’ve a fact-based perspective of need, you can then place the inventory levels you will need for each product in each store location. For present product reorders, a best-of-breed POS platform may use wise algorithms to compute the optimum inventory mix for all your stores, based on real-time information and numerous factors, including run-rates, supplier lead times and inventory statuses.

2/ subtract your supply chain

Now you’ve got a clearer perspective of required stock levels in each shop, it is essential that your supply chain systems are compact enough to maintain.

Spend some time evaluating how fast you can supply different products and send them to clients or between shops.

Suppliers are an integral part of your inventory management system. Think about introducing a compliance system setting out your expectations for service standards, product condition and quality, delivery dates, packaging, customer returns, digital POs and much more. Then feedback and record functionality to each of your providers.

With merchandise ordering and receiving, how formalised are your systems? Are they prone to human error? Have you got visibility of important data so that you can spot potential problems early on? Who knows, maybe even KFC could have retained its famous chicken on the menu and prevented months of restaurant closures, if it was able to quickly recognise and protect against supply chain issues, prior to the issue reached their assumptions…

Last, your shipping and fulfilment capacity ought to be placed under the spotlight. By way of instance, do you have sufficient systems to arrange for inventory to be moved between your shops (and update your stock levels as appropriate)? What home delivery timeframes do you provide and how do these compare to the (offline and online ) competition?

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3/ Quantify and Enhance

A good measure of how well you are managing inventory is your stock turnover rate (ITR). This describes the amount of times inventory is sold in a particular timeframe e.g. annually. Here is how to calculate your own ITR:

Inventory turnover = Cost of goods sold / Average inventory (at cost)

This gives you a feel for if you’ve got a relatively large stock turnover rate, or if inventory is moving slowly through your company, which might indicate a lack of freshness or overstocking.

To really understand how you are tracking, you will want to compare yourself to benchmarks to your business. As a general rule, women’s apparel, cosmetics and pharmacy are in the higher end, with an ITR of 4-6. Jewellery sits in the lower end, turning between 1-3 times annually. You can read more about calculating and using the stock turnover rate here.

In a marketplace where consumer buying patterns are changing quickly, your supply chain management must become more responsive and predictive, to fulfill customer requirements.

By adopting an agile approach that takes advantage of the most recent technology, your company will be better positioned to react to rapid changes in customer demand.





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