Treading on the single path

With expansion there is bound to be more confusions. This understandable fact is applicable to everywhere including retail. Moving at fast pace, matching the demands of the consumers, retailers have understood that brick & mortar stores are not the ultimate format of retailing and retail itself needs to piggy ride on state-of-the-art technology.

Multi-channel retail: the pain in inventory management

The latest trend shows that established retailers are making their presence online brandishing their offerings on the computer screen, enticing the consumers to click the mouse to place their orders. The trend has given birth to multi-channel retailing. In the initial days, to serve the e-commerce customers, the goods are picked from the stores. But as the volume of business grows with the substantial retailing online, the retailers in the US and western countries feel the heat of managing inventory. In India the scene is however different. The challenge for e-commerce is managing what’s on view against what is stock, explains Mr Govind Shrikhande, Customer Care Associate, President & CEO, Shopper’s Stop Limited. But, for corporate retailer like Shoppers stop there are no additional challenges since e-commerce business is still very small. “The e-commerce stock is a subset of overall stock within a store. So no extra effort is required”, informs Mr Shrikhande.

Handing over the e-commerce activities to the third-party service provider had abated the headache to some extent. Besides keeping track of inventory, this third party had the specialised activities that include picking, packing and billing.

The entry of single sourcing      

The Multi-channel Retailing 2010 report by Martec International shows that 67 per cent of UK retailers maintains separate warehouse for non-store channels. However, this practice is gradually phasing out as the need of the hour is integrating the system as the multi- channels produce soaring business volumes. Hence, emerges the necessity for centralised warehousing or single sourcing.

The benefits

It is interesting to note that the Indian companies, for their small volume online business, always prefer centralised warehousing. Metro Shoes, the company that has recently launched its online retail portal is using the centralised system. Farah Malik Bhanji, the Executive Director of the company reasons, “The online retail inventory management flows from our current inventory system. This is extremely critical as e-commerce shopping has yet to kick off on a large scale. Combining both inventories of brick and click ensures a smooth flow of merchandise across both the channels. It also ensures that we can deliver goods within workings days. Moreover, since our physical stores play a very important support role in building confidence in shopping online, it becomes imperative that the same system is used.”

Mr Anil Sharma, GM, Ferns N Petals opines, “Single source or centralised warehousing is a better, faster and more accurate way to manage stocks and inventory in comparision to separate inventory management system as this ensures better results in terms of procurement, liquidity and helps in controlling the wastage and of course low cost of operation.” The result is lesser marked down prices for the products that utilise the channels at faster speed.

Product allocation for channels

However, point to be noted here that the ill managed single sourcing can give rise to the out-of-stock situation where products are either sucked by stores or online retail portal. For this, efficient management requires single stock pile of a product with separate allocation for every channel, so that a certain amount of product is reserved for every allocation and can be made available when it is required in the system. As Ms Bhanji puts it, “When we initially started our planning for e-commerce, we had to alter the way we capture data. It took us a while to learn how to sell shoes without human interface. Currently our store inventory forms the base for online inventory and customers are able to view products that are available across all our stores provided they have a minimum inventory of 5 pairs per SKU.”

There can be a situation when the products are exhausted for online retailing but available for stores. Marks & Spencer has the solution. In this case this retailer allows the product to be streamed in the store but later to be picked up for e-commerce to the specialized packing zone in the warehouse.

Scalability: the key factor

The system should have enough scalability to adjust. Suppose in a system when stock is in excess due to decline in sales in one of the channels, there should be the flexibility in the system to move the goods in another channel so that they don’t hit back to the warehouse.

Switching role is one key factor for single, centralised sourcing. In the next level the system can offer a customer to place order online and collect it from store, or place the order in store and collect it at home. Here, the system will recognise whether the product will be sent to the store through distribution centre or will be sent directly from the warehouse.

Hitches

The system has the flipside because of its fragmentation and for some fundamental differences between managing e-commerce and brick & mortar store. One such big difference is that in online retailing one item is picked up from the warehouse, whereas for store, it is always in bulk. This often makes the single sourcing cumbersome. The distribution system has to be more active to align the stock according to peak hours that vary from stores to e-commerce. So, extra bit of alertness is required.