Leading Retailers Refine, Localize Inventory: Study

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Leading Retailers Refine, Localize Inventory: Study

Those retailers who have thrived during the recession demonstrate excellence in meeting consumer needs and simplifying the customer experience by localizing inventory and refining inventory management processes, according to a new report by Miami-based Retail Systems Research (RSR) in partnership with the Retail Industry Leaders Association (RILA).

The report, “Precision Inventory Management in the Age of Localization,” found that leading retailers recognize the value of smarter investments and processes in managing their inventory. They also tailor their product assortments to meet local needs, and integrate and communicate these inventory management strategies not just with supply chain executives, but also with senior merchandising and store operations executives, to ensure that these strategies are adopted across the entire operation.

“Retailers adhere to the practice of getting the right product in the right place at the right time and in the right quantity,” said Casey Chroust, EVP of retail operations for Arlington, Va.-based RILA. “But in today’s demanding consumer environment and with the expectation of local assortments, retailers are required to operate with an even greater level of inventory precision and sophistication.”

According to the report, leading retailers have placed a bet with improved inventory management that appears to have paid off. Although inventory levels have increased marginally, primarily due to localization, they have been able to sell more merchandise faster, and at a better margin than their peers. According to the study, 29 percent of retail “winners” reported that over the last two years, they have seen an increase in inventory, but 64 percent also reported that they have seen a gross margin increase as well. Lagging retailers, on the other hand, who have not made similar investments and have fallen short in reinventing themselves, are being hit by inventory stagflation and battling the challenge of out-of-stocks on fast-moving inventory and overstocks on slow-moving items.

Winners also recognize the importance of technology investment across the whole of their operations; enhancing mature technology, including warehouse and transportation management systems; and investing in emerging technology such as Radio Frequency Identification (RFID), according to the study. They seek to fine-tune these applications to increase visibility, and support greater localization and cross-channel selling. Retailers that have not made this level of investment in technology are facing greater challenges in managing inventory flow and replenishment.

The findings of this report are based on a survey of 80 retailers conducted from May through July 2009.

To view the report, visit www.retailsystemsresearch.com.