How Strategic Inventory Management Tames Collection Chaos and Boosts Margins

Seasonality dominates fashion retailing – collections change every few weeks in some cases, and customers expect a different offering when they visit a fashion retailer again. This frequent change of collections can lead to high losses of margins. If the interest in an article decreases, the sell-off is not guaranteed. The article is then often sold at the end of the season as part of a clearance sale at a smaller margin to make room for new stock. 

It is therefore important for retailers to have an overview of inventory across the entire fulfillment network in order to avoid overstocks and out-of-stocks and to ensure timely product sales. Intelligent inventory management provides visibility into available inventory across the fulfillment network while identifying slow-movers that have missed their opportunity to sell through other distribution channels. This allows retailers to identify locations where products are selling too slowly and successively sell off these products through other channels during the season. A typical example in the fashion industry is fringe sizes, which are often available in stores but quickly sell out online.

To deal with seasonal challenges, retailers should create visibility into inventory across their fulfillment network, consisting of central warehouses, stores, micro hubs, drop shippers, etc., so they can orchestrate their inventory to meet demand. An inventory management that provides real-time data on availability across distribution channels can help achieve that. This allows retailers to incorporate customer demand for seasonal items into demand planning through data-based demand forecasting, allocate inventory based on demand, and avoid overstocks and out-of-stocks. For example, inventory management gives retailers an overview of which items are selling well in stores and which are more likely to sit idle and potentially not be sold in-store at the highest possible margin.

If the retailer has a comprehensive overview of sales of individual items across the entire fulfillment network, the Distributed Order Management System (DOMS) comes into play. The DOMS accesses the fulfillment network and processes orders in the best possible way based on individual criteria. As soon as a product’s sales drop in a particular store, the DOMS can be used to preferentially route incoming online orders for the product to that store, ensuring sales at the highest margin and reducing inventory. The corresponding item is then shipped directly via ship-from-store from the appropriate store. Resource utilization can also be optimized by ship-from-store, as stores that are less busy for seasonal reasons can be used as shipping warehouses.