Collaborative Inventory Optimization

Inventory optimization requires in the current retail marketplace requires a robust supply chain management process that takes into account the extended supply chain partners, consumers and most importantly the velocity of changes in inventory demand.  In other words, inventory optimization requires the optimization of the entire supply chain in order to really be successful.  The supply chain optimization can be a daughnting task when viewed however when viewed in pieces and tasks that make up the whole it is much more manageable.  Supply chain optimization is a journey and not a destination and this requires continuous review and open collaboration with all partners, internal and external to be successful and most importantly it requires a level of flexibility to incorporate adjustments and refinements to the plan along the way.

Inventory optimization requires analysis of both forward inventory planning along with analysis and review of previous actions in order to improve.  This analysis does require a great deal of analysis along with a healthy dose of gambling on the potential.  In order to improve the chances of success you also need to collaborate with internal and external partners in your supply chain to improve reaction time and reduce the cycle of replenishment ordering in a global supply chain.  This is no small feat, as every retailer and especially apparel retailers know so well.  

I see the next phase of improvements in inventory optimization to require inclusion and a focus on consumers and collaboration with consumers to refine both the forward planning and the backward analysis.  Extending consumer collaboration into the inventory optimization analysis will produce 2 benefits for the effort;

1. It will increase the accuracy of the analysis by providing another viewpoint and perspective on the questions.  Interactive collaboration with consumers will provide a great deal of information and explanations regarding both the purchasing cycles and the product selection.  Interactive collaboration, or more simply conversations, with consumers will allow iterative discovery and improvements that the focus group or survey process cannot provide
2. Engaging consumers in this exercise will increase the retention and also encourage consumers to suggest friends and family to shop with the retailer.  The act of engaging the consumer will encourage the consumer to participate and the participation will then encourage the consumers to return and shop to explore how their interaction has changed the retailer’s offerings.

Optimization of any function requires an iterative process that involves every participate or consumer of the process and inventory should be viewed in the same way.  This is not just some idle experiment though, the success and longevity of the retailer depends on two things that are both impacted by inventory optimization, product supply, the desire of the consumer to purchase the product and adjusting to the consumer demand cycle.  I do not think that retailers can be successful in these objectives without a robust consumer collaboration practice.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?