Inventory Capacity Planning

Retail omni channel inventory planning and management requires capacity measures to be included in the calculations in order to be able to understand and incorporate the most efficient replenishment strategy.  As a direct result of the disruption experienced in the retail omni channel market, the capacity measurements and formulas have been disrupted as well.  This requires an additional degree of measurement because of the changing factors that are involved in the market disruption and must be considered to accurately plan.  In fact I think the supply chain capacity planning and forecasting is quickly becoming one of the most critical pieces to effectively planning for inventory requirements within the retail supply chain.  

The retail inventory management and control function must react to the market disruption quickly and effectively to limit the impact of positive and negative influences on inventory demand.  Capacity planning used to be relatively straightforward and could be controlled through inventory safety levels at the enterprise level.  In the current retail market the capacity planning and support must be pushed closer to the customer in the delivery channel in order to meet the retailer’s delivery commitments.  This, in turn, increases the complexity and also the risk to inventory capacity planning due to the inventory level under consideration and the spread of quantities across locations.  

These challenges are especially complicated with the larger chains because of the span of locations and the complexity in planning sales across channels.  In this environment capacity planning must be consolidated across all channels which is the easy part really and the difficulty comes from inventory consumption support across channels.  Inventory consumption for large regional and national retailers must be supported across channels, essentially utilizing brick and mortar stores and distribution centers for local consumer delivery.  This strategy allows retailers to move the inventory closer to the consumers purchasing and also allows the retailers to increase the utilization of real estate that has been increasingly under utilized.  

Consumers are increasing online purchases and decreasing their in store purchasing which has caused a drop in store and mall traffic.  This trend is not decreasing and rather than divesting the underutilized real estate retailers can repurpose the stores to provide product show rooms and local distribution capabilities.  This strategy will allow retailers to simplify their inventory capacity management, better utilize real estate, better utilize employees to meet consumer demands.  There are many ways to meet the demands of the market and creativity is the most important factor to meet the changing demands.  This method to react to the changing market allows the retailer to utilize the current resources in a manner that supports the demands of the market and eliminates the cost of divesting resources.  

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?