Customer Experience Impacting Retail Management (2012) - III of V

A.    Optimizing the inventory carried of each SKU

While there are certain macroeconomic influencers retailers control (e.g., unsteady financial markets, wildly fluctuating fuel prices and unemployment figures that haven't been seen in decades), most retailers yet are not taking any truly meaningful action to move through their excess perpetual inventory from stores and other sales channels [4]. SKU Rationalization based on customer-buying patterns is a WIN/WIN – Customers get what they want, supply chain costs are reduced and profits grow [5]. In the current economic environment, retailers cannot afford to have cash tied up in excess inventory and the same time does not want to lose when things turn around [6]. In order to increase speed to shelf, inventory turnover and at the same time make sure that capital is not tied up in inventory, retailers have adopted SKU rationalization strategies.

Retailers look to classify their inventories into groups based on sales/profitability and have plans for these groups. The Category Management teams are getting more and more involved in the buy-in process [7]. Retailers look to adopt smart SKU rationalization which can help to make informed decisions about SKUs they carry, reduce costs tied up with excess or stale inventory, while increasing consumer satisfaction and sales.

TABLE VII
Top Store level Inventory Optimization Strategies

Scalability and extensibility of retail shelf-level inventory Visibility Into Product Carrying Costs vs. Incrementally. Timely order fulfilment functions

Leading retailers realize that scalability and extensibility of their retail shelf-level inventory strategies is dependent on improved end-to-end inventory order management [4].  This can be achieved by having visibility into product carrying cost and the benefit. Retailers are looking for comprehensive approaches that enable customer-centric inventory management for each retail stores /channels.

Main question retailers are facing is- what to send to which store for what reason? [8] In addition to calculating the direct and indirect impact of carrying a particular SKU, retailers also look at the “image impact” of carrying or not carrying a SKU. Customers make his or her perception about a store based on the products it carries. This is another factor retailers have to think before doing SKU rationalization.