Top 7 Omnichannel Inventory Management Challenges for Retailers

Here are seven challenges retailers face when adapting their inventory management processes to succeed in the omnichannel world.

1. Accurately Predicting Omnichannel Demand

Predicting omnichannel demand is complex. Retailers must account for various factors when forecasting inventory needs for stores and warehouses. Events like Black Friday or Christmas are predictable, but others are not. Retailers can no longer rely solely on physical store sales. They must also consider the impact of transactions like BOPIS (Buy Online, Pick Up In Store) and home deliveries. The time gap between sales and fulfillment also plays a role in inventory forecasting.

2. Lack of Inventory Visibility

Inventory visibility is crucial for effective omnichannel management. Without it, retailers cannot offer accurate product availability to customers across platforms. Expanding to new channels only makes visibility more important. By using a centralized system for omnichannel inventory management, retailers can ensure they never lose track of stock across sales platforms.

3. Serial Returns

Online shoppers are more likely to return items. A significant portion of online buyers over-purchase with the intention of returning unwanted items. This return behavior must be factored into inventory forecasting for both stores and distribution centers (DC). As return rates rise, it becomes essential to manage inventory carefully to avoid overstocking or stockouts.

4. Defining and Accounting for Lost Sales

In the omnichannel environment, defining lost sales has become more complex. In traditional retail, lost sales were calculated based on factors like day of the week or available substitutes. Today, customers can place orders online, even if an item is out of stock in-store, for delivery. The delivery time influences the probability of lost sales, and retailers must factor this into inventory management and replenishment decisions.

5. Dynamic Replenishment Forecasting

Automated dynamic forecasting calculations are essential for modern inventory management. These systems predict optimal order quantities by considering seasonal trends, inventory levels, and sales data from different locations. Retailers can calculate minimum and maximum stock levels for each item, improving replenishment accuracy. To stay customer-centric, retailers must integrate omnichannel inventory management systems that can handle these complexities.

6. High Inventory Storage Costs

To support omnichannel strategies, retailers must plan for additional storage space and costs. Smart demand planning can prevent dead stock from taking up valuable space. By managing traffic peaks and valleys, retailers can avoid flash sales and sell through inventory that might otherwise cost them more than it’s worth. Omnichannel inventory management systems can streamline data sharing across locations, improving overall efficiency.

7. Omnichannel Retail Technology

A robust omnichannel inventory management system is the backbone of a successful retail operation. Omnichannel strategies cannot be implemented manually. With the right software, every step in the fulfillment process is streamlined. Inventory data is accessible, and order fulfillment is synchronized across channels. Integrated software also ensures better decision-making, giving retailers access to shipping labels, market channel data, and inventory information in one place.

Conclusion: The Future of Omnichannel Inventory Management

Retailers must adapt to meet the evolving needs of omnichannel consumers. To succeed, they need new planning and fulfillment methods to ensure easy, predictable, and cost-effective delivery. This requires an omnichannel inventory management solution that integrates store, DC, and central warehouse management. With the right tools in place, retailers can respond flexibly to changing demand and enhance customer experiences.

Adopting and implementing ChainDrive’s inventory optimization solution is at the heart of supply chain operations in this new world. Our omnichannel replenishment solution will help retailers assess and forecast customer demand and integrate omnichannel execution with store and DC inventory management.