What’s holding back end-to-end inventory visibility?

Discussion
Photo: @ancientplanter via Twenty20
Feb 25, 2019
Tom Ryan

Only 15 percent of U.S. retailers have completed supply chain digitization, according to a study from Gravity Supply Chain Solutions. Perceived costs and ROI concerns were seen as primary hurdles.

Supply chain digitization uses a cloud-based platform that promises real-time supply chain visibility. Other than digital, retailers use hybrid (manual and digital) and manual (i.e., spreadsheets, e-mails, telephone calls) models.

According to the survey of 500 U.S. and U.K retail executives, 49 percent that have not started digitizing said the main factor preventing them from doing so is cost.

The concerns over costs could be attributed to a fear of failing to deliver needed return on investment considering that 29 percent of overall respondents cited the inability to justify cost as the biggest threat to their supply chains.

Indeed, digitization of the supply chain wasn’t seen by many as the absolute answer to omnichannel execution. Only 16 percent of respondents indicated digitization was “very critical” to creating seamless omnichannel retail experiences versus 45 percent indicating “somewhat critical” and 23 percent “not very critical.”

The study did, however, find significant benefits to digitization. Of those who have fully digitized their supply chains, 76 percent believe their organization has enough data and insight to make the right decisions about its supply chain. Companies said that the prime benefits were the ability to respond quicker to trends and shipment disruptions and lowering costs due to efficiencies gained.

Tracking products on spreadsheets remained the top pain point for those relying on manual processes.

Overall, 46 percent of respondents described their supply chain management as manual. Of those, 49 percent had yet to begin planning for a digitization project and only 22 percent were at the planning stage.

Interestingly, 39 percent of digitized retailers cited difficulty integrating various systems as a primary blocker to digitization efforts versus 13 percent of those either partially or not digitized. Nineteen percent of overall respondents indicated that the main blocker to digitization is lack of in-house skills. The same 19 percent said the biggest internal supply chain threat is a reluctance to change the culture within their businesses.

DISCUSSION QUESTIONS: Is end-to-end inventory visibility not the holy grail of omnichannel execution? What factors beyond perceived costs are holding back related supply chain investments?

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Braintrust
"Retailers who don't get their act together on inventory visibility are going to suffer."
"The ROI hasn’t been demonstrated to enough retail leaders to drive mass adoption of the latest supply chain technologies."
"Every retailer knows the answer to this question! Smoke-screen conversations and push backs are telling insights to what the future will look like for certain retailers."

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27 Comments on "What’s holding back end-to-end inventory visibility?"


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Charles Dimov
BrainTrust

Inventory visibility is a key part of the omnichannel equation. All shoppers do their research online. If they don’t see it on your e-commerce site and cannot locate the store that has the one item they want, then they go to your competitor. Simple as that. We were equally shocked to find that in a like-for-like comparison of U.S. retailers across 2017 and 2018, there was a DROP of 31.2 percent in basic inventory visibility. (Omni-2000 US Research) That means retailers have become WORSE at inventory visibility than they were in 2017. Alarming.

Retailers have not been investing enough in the right order management technology that makes this real-time inventory visibility a reality. But I think this is going to change. IHL reported that BOPIS was up 46 percent during the holiday buying season. Simply put – retailers who don’t get their act together on inventory visibility are going to suffer.

Neil Saunders
BrainTrust

Many retailers have taken a kind of patch-up and make-do approach to creating an omnichannel supply chain. In some cases this works, but it becomes more tenuous as online sales grow and cross-channel shopping becomes more complex. All retailers will eventually need to bite the bullet, but the cost and short-term disruption are very real barriers.

Robin Mallory
Guest
3 months 23 days ago

Agree. Invest now to keep up with competitors, or wait till your losses kill the business (e.g. need reverse logistics to resell returned merchandise, from which ever channel it’s returned by).

Phil Masiello
BrainTrust

End-to-end visibility may not be the Holy Grail of omnichannel execution, but it is a major part of it. I find it mind-boggling that in 2019 we are still discussing whether or not this is an important part of a company’s execution.

I don’t think it is a cost/benefit or ROI justification that is holding up the needed integrations. I think it is attempting to integrate with legacy systems that did not deliver on their promise. Brands have used manual work and spreadsheets to work around the flaws of these legacy systems. Now no one wants to go back and scrap everything to do it correctly.

It has been proven time and time again that an efficient and visible supply chain improves sales and profits across all selling channels. It is time to move into the 21st century.

Jeff Sward
BrainTrust

The whole article describes what sounds to me like just plain lazy thinking on the part of many retailers. Forty-five percent say it’s only “somewhat critical” and 23 percent say “not very critical.”
Sixty-eight percent are basically shrugging their shoulders. And we wonder why brick-and-mortar stores are going bankrupt? Maybe digitally-native brands had the benefit of starting with a clean sheet of paper and no legacy systems baggage. I’m sure integration is expensive, but they could at least say “critical” which would put it at the top of the list of survival mechanisms that need to be figured out.

Rick Watson
Guest

It’s lazy thinking as well as short-term thinking. Which perhaps are the same thing. If Y/Y sales are flat to down, almost every other key technology decision suffers. Very few retailers take a step back to “get back to basics.” Really laying out what the ideal customer experience is, and how do my people, processes and systems work together to deliver it.

Jeff Sward
BrainTrust

Unfortunately, “I’m going to be sure I’ve got the basics right” is not an applause line for a retailer. It’s supposed to be a given. It’s not.

Brandon Rael
BrainTrust

Aging supply chain infrastructure has become the technical debt that retailers are challenged with, as they move to more omnichannel like execution strategies. Traditional retailers are challenged not only systemically to become more agile, flexible, and connected, but also have to deal with the cultural implications as well.

One side of the IT focus is on maintaining the aging infrastructure and keeping the ship running with zero downtime. The other side of the IT team has to be absolutely locked in on driving innovation, with the right technologies to support inventory visibility across channels. In order for that to happen, it has to be driven from the C-suite, as its even more of culture and organizational change vs. installing the latest technologies.

Gene Detroyer
BrainTrust

Industry has already proven end-to-end inventory visibility pays out. The computer manufacturer knows exactly where their smallest component is in the supply chain, what country, on what boat, and when it will arrive. The auto maker, the aircraft manufacturer — they all know. And they would not do it if there wasn’t an ROI.

So what is holding back this progress in retail? Culture and attitude. Penny-wise and pound foolish. And maybe most of all, not really understanding what their business is all about.

Robin Mallory
Guest
3 months 23 days ago

I’d add … not really understanding what consumers want, and are getting used to from the leading retail winners. Even if your business does not appear to be global, your customers are global shoppers.

Paco Underhill
BrainTrust

Starting in the last recession we noted an increase in what we called “stuffing.” The shopper in a big box store puts something in their cart, moves to a different section finds something they like better and takes an item out of their cart and discards it in a “foreign” section. Store managers struggling to control labor costs can only clean up messy stores periodically. Thus an item is not sold, inventory shows it’s on the floor — it’s just in the wrong place. We are looking for a better union of store, shelf, and package.

Harley Feldman
BrainTrust

End-to-end inventory visibility is the Holy Grail for omnichannel, especially for BOPIS. Consumers are more demanding in their interest in buying from anywhere and delivering to everywhere. This makes having a flexible supply chain very important and inventory visibility and accuracy are the key elements. The only technical way to have this information available to all of the key players in the supply chain is using the cloud.

Cost and its ROI are the problems the retailers and their suppliers face. Access to cloud-based skills and the difficulty of blending in the data from legacy systems are big challenges. Some retailers and suppliers will find these efforts to be burdensome, but they need to look at the long-term benefits and find a ROI. This is the picture of the future in retail supply chains.

Robin Mallory
Guest
3 months 23 days ago

Agree: “buying from anywhere and delivering to everywhere.” As customer, why should your legacy systems be my problem? Other competitors are figuring it out, so I’ll go there … no “points system” loyalty program is going to hold me to a store that can’t deliver their own inventory.

Adrian Weidmann
BrainTrust

Inventory visibility is a prerequisite for delivering and meeting shopper expectations in the omnichannel shopping and purchasing world in which we now live. It seems as though half of the RetailWire topics that have been posted over the years all lead back to inventory visibility.

Peter Charness
BrainTrust

One-hundred percent accurate up-to-the-minute inventory visibility in-store, in fulfillment centers and in the supply chain remains a vision for virtually all retailers (even having perpetual inventory at all for some would be news). Unlike say airline reservation systems which are up-to-the-minute complete and accurate, retail systems were never designed to support this goal. Yes retailers have traditionally under-spent on technology, but a real-time end-to-end inventory tracking solution is no easy feat either. For product that has enough value RFID seems like the only realistic, short term way out of this conundrum. There is a consideration to be made for available technology that is “good enough” to promise value and engineering the solutions accordingly to get close enough.

Erik Bergeman
Guest
3 months 23 days ago

What I find especially interesting is the chasm of disconnect between the “leaders” in a retailer omnichannel organization and the “leaders” in a retailer supply chain organization. Let’s take for instance department stores. Does anybody really believe other than Macy’s who has made the investment in selling to the last item with RFID, that a department store actually has a better than 65 percent accuracy rate down to the color/size level in a store? Even though there have been many studies that prove the ROI they can’t seam to get over their institutional inertia. When will they realize that they can no longer compete spending 1.5 percent of revenue on IT? #crisisofleadership

Jasmine Glasheen
BrainTrust

When retailers don’t have supply chain visibility, it can result in understocks and overstocks, poor inventory forecasting (stocking up on stuff customers don’t want), and increased shrinkage.

Inventory management systems that do everything on one platform can reduce the difficulties that come with running and scaling a retail business. They can also give retailers total supply chain visibility that can be accessed remotely, so they don’t have to be in a specific location to run their business.

Yet a lot of retailers overestimate how much inventory management systems cost, and how much they can help them save. As Tom points out, comprehensive inventory management systems are becoming the new normal, so it’s time for retailers to stop dragging their feet.

Cynthia Holcomb
BrainTrust

Every retailer knows the answer to this question! Smoke-screen conversations and push backs are telling insights to what the future will look like for certain retailers. Stock analysts should take note. Seamless integration and flawless customer experience are touted as the Holy Grail of retail. Oh yeah, sorry customers, it is above our technical ability to let you know if a product is in stock. Sorry employees, it is too costly to digitize old legacy systems — spreadsheets work! Claiming fear of failure to implement and pay for a digitized supply chain is lack of leadership on display. Retailers, many famous, die in the hearts and minds of leadership years before the physical outcome of the “going out of business” sale.

Robin Mallory
Guest
3 months 23 days ago

At what point does leadership use their own personal shopping as a gauge of where their store is in comparison to the winners and laggards? Or does top brass always have personal shoppers and say, “I never online shop”?

Cynthia Holcomb
BrainTrust

Shopping is a highly subjective experience, managed by a nuanced system of individual human sensory-preferences. A retail leader’s personal shopping experience is a biased comparison. If the “top brass” never shops online, I recommend hitting the keyboard to feel the pain of sorting through thousands of “choices.” Possibly you have nailed the disconnect in individually personalized/curated online shopping: the top brass.

Ralph Jacobson
BrainTrust

The ROI hasn’t been demonstrated to enough retail leaders to drive mass adoption of the latest supply chain technologies. As an example, I still believe blockchain will eventually prove to be for business what the internet has been for communication. However, the vast majority of retail leaders couldn’t talk their way out of a 30-second blockchain conversation if their lives depended on it.

All that says to me is that non-IT retail management can no longer be hands-off with their IT capabilities. The business leaders need to learn the basics of what is possible today to manage inventory.

Andrew Blatherwick
BrainTrust
One of the main issues here may be the word digitization! Do the retailers know what they are talking about when they talk about digitization? If they do, then this is not what is generally being said in the retail industry. Supply chain improvement and efficiency is still seen as the largest single benefit and ROI generator in their business. Improved customer service levels, reduced inventory and increased sales are all vital to the survival of retailers. If they are quoting costs as the biggest hurdle then they are not understanding the equation. To be able to make the most out of the supply chain, and let’s face it, very large retailers talk about competitive edge through their supply chain, you need end-to-end visibility. This is not rocket science. The capability has been around for a long time. I can only believe that they do not understand the term digitization as the industry has moved on from asking if end-to-end visibility is necessary and if nearly 50% do not see this as a good investment… Read more »
Rick Watson
Guest

Of course it’s a huge thing. Most commonly, technology and process issues are the biggest reasons for improper inventory visibility. Even if you have a “system” (EDI/etc), do partners on both sides know how to use it? And is the proper data flowing in a timely enough fashion?

At this stage, most all retailers have tried to install such systems but often new suppliers are unwilling to integrate because of the “so what” factor. Show me sales before I invest in your platform, and pay money for it.

James Tenser
BrainTrust

The key terms missing from this discussion are “store-level” and “real-time.” Warehouse inventory visibility is meaningless to the shopper who encounters a void at the shelf. It does next to nothing for the online or mobile shopper who has no reliable way of knowing that a desired item is in stock for a store-delivered or click-and-carry purchase.

Since stores are not located in the cloud, there is a compelling need to focus monitoring and measurement activities in the physical world. Sure, that data will be accrued in digital form, but that’s kind of a tautology, isn’t it?

My point is that you can’t have end-to-end inventory visibility when you ignore one end of the chain. Real-time, store-level perpetual inventory visibility is not a nice-to-do. It’s a life and death requirement for any retailer that plans to survive into the next decade.

Ken Morris
BrainTrust

End-to-end enterprise inventory visibility is now a retail imperative to offer consumers the omnichannel services they expect, such as BOPIS. Without accurate real-time inventory visibility across the chain, retailers need to rely on safety stock to offer omnichannel shopping services. Retailers that can’t sell an item in the store to online shoppers unless they have a safety stock of two or more of the item in stock according to the retailers “best records” of in-store inventory. Safety stock is an expensive, often hidden, cost for retailers.

According to BRP’s research, costs and lack of internal resources are the primary inhibitors to taking action on these initiatives, which aligns with the “Gravity Supply Chain Solutions” study.

Nick Daly
Guest

Fragmentation or a nervousness to go early. Ultimately that will be the downfall of many and those that succeed early will reap huge rewards. The drive comes from the top, but go to gemba early and phase diligently.

Oliver Guy
BrainTrust
One word: “silos.” In every conversation I have with a retailer on this topic, the common theme that is always behind problems with understanding inventory. Anecdotally we are seeing examples of inventory increasing as retailers sell and fulfil across more channels — the inability to move inventory between channels is pushing inventory upwards — but lack of understanding of what inventory exists is the first barrier to tackle before you can contemplate any movement. Anyone who has ever studied manufacturing and the theory of constraints will be familiar with the analogy of the “Sea of Inventory” where water level is equated to inventory and as it is reduced rocks — which are analogous to manufacturing issues — are exposed. Never has this analogy been more appropriate in retail than today. I don’t see it as “the holy grail” it is a starting point. More than that it an essential starting point. “You cannot manage what you cannot measure” — it is THE key asset in omni-channel execution therefore has to be understood. Aside from investment… Read more »
wpDiscuz
Braintrust
"Retailers who don't get their act together on inventory visibility are going to suffer."
"The ROI hasn’t been demonstrated to enough retail leaders to drive mass adoption of the latest supply chain technologies."
"Every retailer knows the answer to this question! Smoke-screen conversations and push backs are telling insights to what the future will look like for certain retailers."

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