Getting Off the Inventory Overstock/Out-of-stock Seesaw

It has always been nearly impossible to predict consumer demand—both in terms of volume and specific products and services. Today, rising interest rates have made shoppers even more inscrutable. In some cases, they’re pulling back entirely. In others, they’re still shopping but the calculus they use to determine where to spend their discretionary income has changed. This inability to pin down what shoppers will want when means that inventory is often too high or too low but rarely just right.

It's a seesaw that has plagued the industry for decades. And the pandemic only exacerbated those swings. First, demand soared but bottlenecks and work stoppages left racks bare. Then, retailers opted to hoard safety stock, which led to the inventory overhangs the industry is still working through today. While a black swan event of that magnitude is unlikely to happen again, the fact is, uncertainty and disruption are here to stay.

As the glut of excess is slowly declining, retailers have entered a chase season, in which stores are opting to scramble to bring in goods based on need to remain lean. While the reasoning is valid, the reality is, too few companies along the supply chain utilize the tools needed to make it effective.

For companies operating with analog systems, the supply chain is too long and complex to reliably deliver in a short time frame. Add brands’ lack of visibility into operations on the factory floor to the mix, and it’s almost certain the inventory imbalance will continue.

That is unless the industry embraces digitalization.

BlueCherry’s Supply Chain Management platform powers the chase model. By marrying real-time work in progress (WIP) information with sales data, you have a truly responsive supply chain that’s both faster and more accurate. This all adds up to cleaner inventories and fewer missed opportunities.

Here are three ways BlueCherry enables better inventory management.

Production Postponement

Consider the scenario in which you send a test shipment of styles to stores to determine whether shoppers prefer the baby rib tanks with flutter sleeves or spaghetti straps and the wide leg trousers in khaki instead of burgundy. Armed with that sales data, you could commit to a full production run using raw materials you already have cued up.

Employing postponement brings decision making closer to need, meaning you no longer have to guess nine months out what shoppers will want for the coming seasons.

Just-in-time production strategies like this rely on a firm understanding of what’s happening on the factory floor. Unfortunately, those operations are often siloed. Sourcing Journal’s 2022 Fashion in Focus Report revealed that almost half (44 percent) of the brands and retailers surveyed don’t have a line of sight into factory capacity. Further, 49 percent are clueless about their production partners’ efficiency metrics.

BlueCherry’s Supply Chain Management platform delivers the necessary visibility to make postponement a reality.

Allocation Postponement

Armed with real-time sales data, you not only know what to cut but where each SKU is selling best, which is a critical component of avoiding inventory imbalances. A style that’s a hit in one region might have sluggish sell-throughs in another BlueCherry’s Supply Chain Management platform provides the ability to determine where goods should be allocated based on performance. Allocation postponement also means you can bypass your 3PL and leverage your factory for distribution instead, sending re-orders of the season’s must-have cropped hoodie directly to the doors with the highest turns.

Vendor Management

A key part of the chase strategy is knowing when to lean into the right parts of your diversified supplier base. Connecting BlueCherry’s ERP to your POS allows you to quickly identify the production partners that can replenish on a dime based on product and location. For instance, if you’re looking to get back into a best seller in L.A., Shanghai might be your best bet over Bangladesh since in this case, you’re prioritizing lead times over price. BlueCherry’s ERP makes decision making based on a variety of factors like proximity, productivity, lead times and infrastructure easier.

Learn more about how to manage inventory better in the new e-book: “Unlocking Supply Chain Productivity: The 6 Keys to Success for Fashion, Apparel, Footwear, and Home Goods Companies.”