It’s the holiday season again and a perfect opportunity for retailers to take their business to the next level. Holidays are the most profitable phase for retail businesses, like many other industries, if managed well. At the same time, holidays have also been the most challenging time for retailers to efficiently manage their inventories because of peak loads. Moreover, the challenges are manifold now due to the additional inventory management and supply chain crises triggered by the pandemic.
Businesses are gradually discovering the long-term deficiencies in their operations and are trying to correct them by adopting digitalization, technology, and inventory management software. Studies suggest that the inventory management software market size will rise to USD 5 billion by 2026.
Let’s first understand the anticipated inventory management challenges this holiday season.
Inventory Management Challenges That Retailers Face
Here are the common retail inventory management challenges and the additional issues brought in by the pandemic that retailers should prepare for, in advance, this holiday season.
Retail Inventory Management Challenges
Retailers typically deal with numerous inventory management issues like overstocking, understocking, picking of wrong items or mispick from the warehouse, deadstock management, inventory tracking issues, backorders, managing peak load phases, delays due to supply chain deficiencies, human errors/inaccuracies in data in manual inventory management, and more.
Besides, retail businesses need to face frustrated customers due to issues like out-of-stock items, delayed delivery, wrong deliveries, complicated returns/funds, payment issues, deficiencies in the online shopping portal, and more. These issues lead to wastage of resources, inefficiency, losing customers, loss of reputation, increased costs, and diminished profits.
Pandemic Induced Challenges
The Covid pandemic has made it further difficult for businesses causing numerous additional problems like supply chain disruption, safety concerns in stores requiring strict measures, customer apprehensions/fear of going out, and more.
The pandemic has also significantly changed market dynamics, consumer behavior, and customer expectations; for example, people barely socialize or focus on entertainment as the pandemic continues. Human attitude and requirements have moved from developmental to mere survival, thus limiting the needs and the market.
Buyers are now more need-focussed and shop mainly for essentials than luxury items. For example, beauty products are losing buyers’ interest as people need to wear masks and observe social isolation. While masses preferred in-store shopping before the pandemic, the fear of going out and catching infection has resulted in a preference for online shopping instead of in-store visits.
Furthermore, the pandemic caused global supply chain disruptions adding fuel to the fire and resulting in massive delays that led to inventory running out of stock. Recent studies suggest that 32% of potential purchasers switched retailers instead of waiting for out-of-stock items. Retailers are investing in additional resources to prevent this. Businesses thus face the burden of overheads, including wages, rents, and increased inventory/supply chain costs.
Holiday Season Amid Pandemic
The year’s best time for businesses, the holiday season, comes with its own set of challenges for retailers. To prevent losing customers, retailers must manage peak loads better amid the pandemic challenges this holiday season.
Estimating and optimizing inventory levels during peak season is further demanding and strenuous. Deficiencies lead to stock running out, delays, poor customer service, dissatisfied customers, and reputation damage. Higher workloads and annoyed customers give rise to employee frustration and attrition that directly impact the business.
The numerous changes in the market, supply chain, and customer behavior make it challenging to estimate and forecast demand through past data analysis. The data has altered remarkably from pre-pandemic times for the holiday seasons, making it impossible to draw valuable conclusions.
So, what should retailers do to overcome these issues and enhance inventory management this holiday season?
Top 5 Retail Inventory Management Tips for Peak Loads Amid Pandemic
Both customers and retail businesses wait for the holiday season all year round. Poor inventory management during holiday peak loads coupled with pandemic-induced challenges can make retailers miss this golden opportunity to boost profits. So, here are the top tips for retailers to prepare their inventory this holiday season.
1. Accept and Adapt to the New Normal
Retail business owners must accept that the pandemic has remarkably changed the inventory management scenario, but this is now the new normal. Customer preferences and habits have also changed dramatically. Below are some noteworthy observations from GoodFirms’ research that offer prominent insights into changes in buyers’ behavior and preferences post-Covid.
Thus, it would be wise for businesses to adapt to these changes and modify their operations and strategies accordingly.
Firstly, retail business owners must switch to digitalization for enhanced inventory management by leveraging software tools. Inventory management systems can be a game-changer during peak loads. These provide automation of processes, real-time access/updates, warehouse management, supplier management, multi-location management, product management, demand forecasting, analytics, reporting, security, scalability, and customer support features and help solve numerous inventory challenges.
Customers now follow social distancing and avoid crowds, so they no longer prefer in-store shopping, particularly in peak/holiday seasons. Thus, businesses must now plan and explore online business possibilities to ensure continuity and growth. Adopt technologies like AR, VR, AI, IoT, and more to make customer journey smooth and offer in-store experience in online mode. Additionally, people are confined to homes, so online marketing can be more effective.
As perfectly quoted by Michael LeBoeuf, “A satisfied customer is the best business strategy of all.”
So, this holiday season, retailers must focus on earning customer trust. For this, adopt all possible safety measures and norms for in-store customers. Implement policies and set strict protocols to ensure safe distancing. Also, sanitize the premises, surfaces, and products at regular intervals. Retailers can also seek customer feedback and suggestions on social media platforms.
2. Leverage Ways to Better Forecast Demand
Deloitte’s annual holiday forecast indicates that holiday retail sales will likely increase between 7% and 9% in 2021. It suggests that retailers need to put extra effort into managing inventory this holiday season by adopting ways to forecast the demand better.
Considering the supply chain issues, change in customer preferences, and post-pandemic sales trends, here are some ways retailers can better forecast demand and adjust the safety stock accordingly.
- Identify sales trends to predict future sales by leveraging past sales data. Apply corrections and adjustments considering pandemic-induced changes in customer preferences and the holiday season; focus on seasonal items and essentials.
- Based on the above, calculate the safety or buffer stock:
Safety stock = [max daily sale * max lead time (in days)] - [avg daily sale * avg lead time (in days)]
- Adjust the safety stock to account for supply chain delays and set the inventory reorder point based on the sales trends and safety stock computations.
- Perform market research to evaluate customer preferences and demand through social media surveys before the holiday season. Also, seek customer feedback and suggestions to improve the customer experience for in-store and online shopping. Additionally, gather detailed information and statistics on changing trends from market experts to ensure that you are on the right track.
- Leverage artificial intelligence (AI) and machine learning (ML) based software tools for demand forecasting, like inventory management software and sales forecasting software for business intelligence insights for better decision-making and accurate demand forecasting. AI is one of the best general- purpose technologies we are seeing today, and its dominance will not come to an end, says GoodFirms.
3. Improve Supply Chain Management
The pandemic has caused global supply chain disruptions, making inventory management further challenging. Studies suggest that 38.8% of small businesses in the U.S. alone experienced supply chain delays due to the pandemic, and overall supply chain disruptions increased by 14% from 2019 to 2020. It also highlighted that the estimated value for out-of-stock items in 2020 was USD 1.14 trillion due to the pandemic-induced global supply chain disruptions.
As per Statista, 27% of surveyed businesses plan to keep inventory levels the same but make adjustments to the supply chain network during the post-pandemic era. So, to prepare the inventory for this holiday season, retailers must consider the following ways to balance the supply chain issues.
- Identify the deficiencies or weak points in the supply chain.
- Address the issues with suppliers and logistics networks and request advance measures to prevent supply chain disruption during the holiday season.
- Adopt real-time inventory management to get timely updates.
- Utilize supply chain control towers to enhance real-time visibility into operations.
- Streamline accounting and returns management processes.
- Diversify delivery mechanisms; partner with third-party delivery partners.
- Add human and material resources to balance the supply chain deficiencies for the peak loads.
For more insights on innovative strategies for enhancing the supply chain during the pandemic, check the IKEA News Story.
4. Focus on Enhancing Employee Satisfaction
Employee frustration and attrition due to increasing workload, pandemic-related fears, and health issues can also cause concern for retailers this holiday season. So, the next tip is to realize that employees can be your biggest asset during peak loads, more so during the pandemic crisis. Digilent efforts by businesses on enhancing employee motivation and satisfaction can help manage the inventory and operations better during peak loads this holiday season.
Retailers must offer extra perks, including medical insurance, bonuses, incentives, and overtime, to motivate the staff for added workloads and encourage retention. Pay extra attention to employee health and safety measures at work, including Covid precautions, protocols, routine testing, etc.
Besides, businesses must invest in staff training to increase staff productivity and performance; for example, train them to leverage software tools to streamline operations, save time, and cut-down overall costs.
5. Balance and Distribute Peak Loads
The best way to handle peak loads and still ensure business this holiday season is to distribute the load. Retailers can achieve this by encouraging customers to make their planned purchases before the holiday season instead. This strategy would also ensure advance capture of the market share and better inventory planning.
To achieve this, retailers must start early promotions and advertising through social media platforms. Also, provide discounts and special offers to customers for ordering early, much before the holiday peak loads begin; for example, Amazon typically offers attractive discounts on most items before a festival holiday.
Besides, retailers must deploy additional resources for load distribution; for example, hiring temporary contractual staff for the holiday season will ease inventory planning and management, reduce the burden on employees, and prevent hassles of peak loads.
Inventory Management Software to Optimize Inventory This Holiday Season
As discussed above, retailers can solve numerous inventory management challenges and witness enhanced inventory management this holiday season amid the pandemic by adopting the right software tools. Here are the benefits of using inventory management software for your business.
Holiday seasons offer the perfect growth opportunity to retail businesses, but these are also the most challenging times in terms of inventory management. If not managed well, retailers can suffer irreparable damage to their profits and reputation during the holiday season due to peak loads and can even permanently lose their loyal customers.
With the top 5 tips to prepare inventory this holiday season as discussed, retailers can resolve numerous inventory management challenges and achieve perfect inventory management even with peak loads during the holiday season and amid the pandemic.