The Supply Chain Black Hole
Written by Evan SchumanAugust 23rd, 2007
For e-tailers that use their in-store inventory also as their online inventory, they are discovering a problem with the supply-chain blackhole: which products invisibly enter when they leave the shelf and don't re-emerge until they are paid for.
This is particularly an issue with retailers trying to make shop-online-pickup-instore work. Without item-level tracking, the concept of a realtime inventory is almost impossible to deliver. This problem is only going to get worse during the holiday onslaught, especially when online purchasers are trying to get the hottest and most popular gift.
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Our Comment SPAM system is getting very aggressive these days and has been blocking legitimate comments. If you post a comment and don't see it appear within 2 hours or so, can you please send a heads-up to customer-service@storefrontbacktalk.com? Ideally, please include the time you posted the comment. That will allow us to try and hunt for it. Thanks! P.S. We're working on fixing the system, but we don't want to lose any valuable comments in the meantime.
-Christine
August 23rd, 2007 at 2:19 pm
Evan,
You touched on an important
cause of supply chain black hole syndrome. In addition to hot seasonal products languishing in shopping cart limbo, vendor sponsored and other TPR promotions can create a run on items that wipe out shelf stock before corporate merchandisers know what hit them. Any thoughts on the role demand elasticity plays in forecasting how quickly product managers should be replenishing their shelves. Clearly I have a few suggestions in a pinch but would like to hear your perspective.
Regards,
Warren Love
Director of Sales – Grocery and SCM
Retalix USA
September 3rd, 2007 at 10:53 am
Evan: Good article. However there are a couple of other wrinkles to the story which make the black hole somewhat bigger:
1. Who says the recorded inventory balance on the inventory control system is correct? Manufacturing and retail companies have struggled for years to get inventory “correct” and it’s still not fixed, even with perpetual inventory and regular auditing.
2. Even item-level tagging will not be a complete fix. The problem is that the inventory in the shopping card is still (legally) owned by the retailer until the buyer has paid for the goods AND has also taken physical possession of the goods. So the inventory system needs to have at least three inventory balances for each item: 1 “In stock”; 2 “Reserved” for items in shopping carts; and 3 “Paid but not collected” for items bought by a customer in another store who will collect the item at some point in the future. Note that problem number one applies to the inventory system balances for all three statuses!!!
Regards from Charlotte, NC.
Sean Connolly