4 Tips to Help Mid-Sized Retailers Better Manage their Supply Chain
The retail industry has faced significant challenges over the past two years, but the supply chain was one of the most affected areas for retailers of any size. Studies show that Coronavirus disrupted the supply chain of 75% of U.S. companies. Raw material delays, shipping obstacles, and transportation changes have taken their toll on North American retailers, yet consumer demand doesn’t wane. As we move towards fall, retailers are wondering how to prepare for the upcoming holiday shopping season. A recent CNN report found that ⅔ of nearly 7,000 company earnings calls in July included discussion of supply chain obstacles, up from 59% compared to the same period last year.
Retailers currently face a world of challenges in their supply chain and inventory, leaving unhappy customers facing empty shelves or “out of stock” notices. Fast-moving products are quick to go out of stock, while slow-moving products take up valuable space. Worst of all, these out-of-stock moments can occur at the busiest stores in the fulfillment cycle. These issues only compound when a retailer encounters other challenges, such as an inaccurate inventory. All of this requires a careful examination of how you, as a retailer, are offering in-demand goods. Here are 4 tips on how you can better manage your supply chain and inventory anywhere, reduce out-of-stock moments, and keep your customers happy.
Examine The Data and Use it for Better Fulfillment
Data, particularly inventory data, is the lifeblood of your retail operation. As a mid-sized retailer with more than one store, it’s important to have ALL of your data easily accessible. Using a centralized system that collects data enables you to maintain a precise inventory. Once your data is consolidated, you can start to forecast trends, see opportunities to improve your inventory, and learn how to best segment your data for particular customer groups. Don’t use a one-size-fits-all model, and instead, create inventory levels that best meet the individual store’s needs.
Example: You’re a retailer with two clothing stores: Store 1 and Store 2. You traditionally stock both stores’ inventory based on square footage, despite Store 1 being slightly larger. Store 1 does very well in children’s shoes, but its sales in children’s shorts are significantly less. Store 1 is your higher-performing store, but you know that, based on consumer demand and past sales, Store 2 sells more shorts. Therefore, you should create an inventory using store-level demands and requirements, sending Store 2 more shorts than Store 1.
Reduce Shipping Times By Leveraging Your Existing Stores as a Hub
Surveying consumers worldwide on purchasing decisions, McKinsey found that 40% of respondents said they tried new brands. In the United States, 46% of the respondents said they made a switch. The overall reason for abandoning their loyalty was seeing out-of-stock merchandise. Retailers should make sure they can get orders fulfilled quicker by creating hub stores, stores that handle the fulfill demand of multiple stores.
By leveraging an existing store as a distribution center, you can alleviate demand on your warehouse and get orders filled more quickly. This will enable you to offer a shorter delivery time and reduce your shipping costs. For one of the best examples of a brand leveraging its stores, look to Target. In 2020, when Target launched its same-day fulfillment option, it began using its stores to fulfill orders. Today, Target says it fulfills 95% of its total online sales with merchandise sourced directly from its brick-and-mortar locations. Target’s Q2 2020 earning report showed same-day fulfillment offerings grew by 273% with its Drive Up service growing by more than 700%. The brand plans to invest more in the store-as-hub model, opening four new “sortation” locations to help sort, organize, and ship out products to consumers even faster.
Evaluate Your BOPIS Process
As mid-size retailers continue to struggle with supply chain challenges, they should look at their current order fulfillment process, specifically BOPIS (Buy Online, Pick Up in Store). BOPIS has exploded in popularity, with the industry forecast to reach $140.96 billion in the US alone. Is your BOPIS running as well as it should? Customers who use Buy Online, Pick Up in Store should know exactly what to expect, and they should have these guidelines communicated to them, with information on when, where, and how they can complete their order pickup. If any of these parts are missing or aren’t easily accessible, then you’re going to be left with a dissatisfied customer who may even cancel their order. Brush up on any and all communications you have for BOPIS and consider offering a status alert update via SMS text message with each step of the process.
Revamp Your Returns
Returns don’t stop during a pandemic and they don’t stop in times of supply chain disruption either. Indeed, the National Retail Federation saw $428 billion in merchandise returned in 2020. One problem in supply chain management is when a customer returns an item to a store, but the store location wasn’t where the shipment originated. The item may be returned to a store where it won’t meet the same demand as another location, which confuses the inventory of that particular store. One solution to this issue is to create a system with your returns by logging them into your overall retailer inventory, so all of your stores can access it and use it to fulfill an order if needed.
Looking Forward to Fall 2021 and Beyond
Supply chain disruptions will likely continue through 2021 and retailers should be equipped to handle anything more the pandemic throws their way. Magstar’s ERP software contains everything a retailer needs to run their business better, both during this turbulent time and in the future. From store operations to warehouse and supply chain management, it’s an all-in-one solution that helps you manage inventory, orders, and fulfillment. You can now run your store with a single software via your mobile device allowing you to access your retail operations wherever you go. Magstar even lets you create “store personalities” to define how much inventory will be set for each store and vary it according to needs, not square footage.
As we prepare for the holiday shopping season, give your store the best advantage in the wake of supply chain disruptions and rising customer demand. Connect with Magstar President Steven Greenwood and see how Magstar can help.
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