Running a business with both a physical store and an online shop – often called a ‘bricks and clicks’ model – offers fantastic opportunities. You can reach more customers and cater to different shopping preferences. However, managing your inventory in this dual environment has become increasingly complex, especially in today’s unpredictable world. From supply chain disruptions to shifting consumer behaviour, striking the right balance in your stock levels is crucial to avoid empty shelves (online and in-store) or ending up with piles of unsold goods.
The old ways of managing inventory might not cut it anymore. You need a smarter, more adaptable approach that considers the unique demands of both your physical and online channels. Let’s dive into some best practices for navigating this ‘age of uncertainty’ and achieving that sweet spot of optimal stock levels.
Understanding the Different Demands
The first step is recognising that your physical store and online shop often have different demand patterns:
- Physical Stores: Sales can be influenced by local events, seasonality, foot traffic and even the weather. Customers expect to see and touch products before buying and want immediate availability.
- Online Stores: Demand can be driven by digital marketing campaigns, website promotions, social media trends and can reach a much wider geographical area. Customers are often more accepting of slightly longer delivery times but expect accurate stock information online.
Failing to account for these differences can lead to problems. You might have good availability of an item in your warehouse but not on the shop floor, frustrating walk-in customers. Conversely, you could be out of stock online while your shelves are full, missing out on digital sales.
Best Practices for Integrated Inventory Management
To effectively manage inventory across both your physical and online channels, consider these strategies:
Implement a Centralised Inventory Management System: This is the cornerstone of successful bricks-and-clicks inventory management. A robust system provides a real-time view of your entire inventory, regardless of location. This allows you to track stock levels accurately, monitor sales across both channels and make informed decisions about restocking and transfers.
Accurate Demand Forecasting: While uncertainty is a factor, you still need to forecast demand for physical and online sales. Use historical sales data, factor in seasonality, planned promotions and marketing campaigns for both channels. Advanced analytics tools can help you identify trends and predict future demand more accurately. Remember to forecast separately for each channel initially and then look for overlaps and potential synergies.
Safety Stock Levels: In today’s volatile environment, maintaining adequate safety stock is crucial. This buffer inventory helps you absorb unexpected surges in demand or delays in your supply chain. However, avoid the temptation to overstock as this ties up capital and increases storage costs. Calculate your safety stock levels based on lead times, demand variability and your desired service level.
Strategic Stock Allocation: Decide how you will allocate your inventory between your physical store(s) and your online warehouse(s). Consider factors like lead times for replenishment, the cost of transferring stock between locations and the specific demand patterns of each channel. You might need to reserve a certain amount of stock specifically for online orders or ensure your physical store has enough popular items on hand.
Order Fulfilment Strategies: How will you fulfil online orders? Consider options like:
- Centralised Warehouse: All online orders are shipped from a central warehouse.
- Store Fulfilment: Utilise your physical store(s) to fulfil online orders, especially for local customers. This can speed up delivery and reduce shipping costs.
- Hybrid Approach: A combination of both, depending on product availability and customer location.
Choosing the right fulfilment strategy impacts your inventory allocation and the efficiency of your delivery network.
Real-Time Visibility and Tracking: Ensure your inventory management system provides real-time visibility into stock levels across all locations. Implement tracking mechanisms for both incoming and outgoing goods. This allows you to react quickly to low stock levels or potential bottlenecks.
Regular Inventory Audits: Don’t rely solely on your system. Conduct regular physical inventory counts to identify discrepancies and ensure the accuracy of your records. This helps prevent stockouts and identify potential issues in your processes.
Flexible Replenishment Strategies: Be prepared to adjust your replenishment strategies based on real-time demand and potential disruptions. Consider using techniques like just-in-time (JIT) inventory for certain items, if your supply chain is reliable, but be cautious in uncertain times. Having backup suppliers and flexible order quantities is a smart move.
Cross-Channel Visibility for Customers: Provide your customers with accurate stock information across all channels. If an item is out of stock online but available in a physical store, let them know. Consider offering options like checking in-store availability online or offering in-store pickup for online orders.
Data Analysis and Continuous Improvement: Regularly analyse your sales data, inventory levels and fulfilment performance for both channels. Identify trends, optimise your processes and adapt your strategies as needed. The ‘age of uncertainty’ requires a continuous learning and improvement mindset.
Navigating Uncertainty
In the face of unpredictable events, building resilience into your inventory management is key:
- Diversify Your Supply Chain: Don’t rely on a single supplier. Having multiple sources can mitigate the impact of disruptions.
- Maintain Communication with Suppliers: Stay in close contact with your suppliers to understand potential risks and lead time changes.
- Scenario Planning: Consider different potential scenarios (e.g. increased demand, supply chain delays) and develop contingency plans for your inventory management.
Conclusion
Managing inventory effectively in a bricks-and-clicks business during uncertain times requires a holistic and integrated approach. By implementing a centralised system, understanding the unique demands of each channel, and embracing flexibility and data-driven decision-making, you can strike the right balance, meet customer expectations and ensure the smooth operation of both your physical and online stores. It’s about having stock in the right place at the right time, without being weighed down by excess inventory – a delicate balance that, when achieved, can be a significant competitive advantage.