Is your retail supply chain working at full efficiency?

As retail supply chains continue to become increasingly complex, they have also become increasingly critical to a retailer’s success. Retailers today constantly strive to find the perfect balance in the supply chain to ensure the right products are always available in the required quantity, in the right location, exactly when needed. Unfortunately, many still have a weak supply chain and it’s easy to spot. Out-of-stocks tell all. By simply looking at the store shelf, it is clear whether a retailer’s supply chain needs improvement.

While many retailers invest in strategic initiatives to maximize the supply chain, many overlook a key component to enhancing revenue and increasing customer loyalty -- precise orders. After all, if customers can’t find the products they are looking for, they will shop somewhere else. Retailers must refocus their efforts on shoppers and replenish stores based on demand. This can be done by utilizing an automated ordering and forecasting solution that provides precise orders. This will enable retailers to boost top-line sales and bottom-line performance.

Below are critical signs that your organization will highly benefit from an automated ordering and forecasting solution:

1. High out-of-stocks/overstock

Out-of-stocks have been an issue in retail since the beginning of time. Studies show that at least half of out-of-stocks result from inadequate demand forecasting and store-ordering processes. This means the retailer has lost control of its inventory stock. On the other hand, forecasts that are too high result in increased trans-shipment costs between distribution centers. It also creates excessive inventory, causing retailers to drastically discount products.

2. Increased capital investment costs

Maintaining service-level goals is costly. Broad assortments drive inventory costs up, while narrow assortments fail to meet consumer demand and cost retailers in customer loyalty. Therefore, the key to success is to strategically select the best assortments and purchase them in the most cost-effective way -- a process that is extremely difficult to perform without an automated ordering and replenishment system.

3. High-maintenance replenishment systems

Home-grown and older replenishment systems require constant maintenance and upgrades in order to keep them working in sync with a retailer’s other legacy systems. Further, the majority of these vendor systems rely on weighted averaging methodologies, which no longer meet today’s sophisticated replenishment needs. Only robust systems can scale to the level needed by today’s largest retailers.

4. Manual store ordering process

Lastly, manual store ordering is not only time consuming, but its success and accuracy relies solely on the experience of department managers. If orders are too high or low, both the operation and shoppers will suffer. Further, with manual-ordering processes it is common for personnel to have to override and augment existing orders, which can be costly and affect the bottom line.

If a retailer suffers from any of the above issues, it should implement an automated ordering and forecasting solution that takes a demand-chain approach and focuses specifically on customer and future buying patterns. This will enable the organization to fully automate the forecasting, replenishment and store-ordering processes using a single, common set of integrated tools. Further, by using an all-encompassing solution, the retailer can optimize the entire demand chain -- from the store to the warehouse to the manufacturer - and achieve a significant competitive advantage through lower inventories, improved product availability and higher levels of customer satisfaction.

Leading retailers that have taken the step to use an automated ordering and forecasting solution have seen significant improvements in top-line sales performance and have dramatically reduced out-of-stocks. More specifically, retailers typically increase sales by 1% to 2%, reduce out-of-stocks by 85% and reduce inventory costs by 20% to 30%. Lastly, a full computer generated ordering (CGO) system can automatically handle between 95% to 99% of all store orders without manual intervention. Many may wonder if this level of granularity will yield optimized orders, but an efficient solution will be fully scalable and accurate to fit the retailer’s needs. With these new benefits, retailers are able to execute better product planning, tighter vendor collaboration and improved merchandise execution.

Overall, by investing in a strategic automated ordering and forecasting solution, retailers can achieve full automation and highly granular business intelligence to its demand forecasting, store ordering and replenishment processes. The bottom-line result is saved time, money and work -- all while maximizing the supply chain.

Kevin Stadler is VP sales and marketing for SAF USA. He can be reached at kevin.stadler@saf-ag.com.