Auto Replenishment in the Retail Scenario
The current Indian Retail Market is highly competitive in nature and hence retailers require tools like Automatic Store Replenishment that provides them with a competitive edge ensuring success in the Indian Retail environment. Majority of the Indian Retailers are continuously aiming to improve Customer loyalty by offering good service. At the same time, they are struggling to reduce the costs in order to stay competitive. This is where Automatic Store Replenishment comes into play.
In order to understand the role that Automatic Store Replenishment in the daily life of a retailer, we take a look at the main advantages ASR has to offer:
1. Lower out-of-stocks and Higher Sales
When products are out-of-stock, retailers suffer from customers buying elsewhere. As a result, manufacturers suffer from brand substitution and non-sales. Strong brands show more store-substitution and weak brands show more brand substitution.
Ordering Mistakes are the main cause shortage of stock. It is stated that in-store manual ordering mistakes account for 50% of out-of-stocks and this is something that can be easily solved with the help of Automatic Replenishment systems. ASR allows retailers to estimate the inventory levels at the time of delivery with the help of a forecasting system.
2. Lower Inventory costs and higher margins
Automatic Replenishment systems make it possible to choose between many different ordering techniques. It is important that Retailers order either Fill-to Minimum or Fill-to-Maximum. Fill-to-Minimum is when retailers order to stay above the minimum stock levels and Fill-to Maximum is when retailers require the shelves to be full.
3. Lower labour costs by cycle-counting
Automatic store replenishment helps reduce labour costs since manual ordering is replaced by automatic ordering. Cycle-Counting is a technique of choice to maintain correct stock data. Retailers are no longer required to check shelf stock at each order cycle, instead, the stock levels are counted every 4-8 weeks and compared to database information and hence further reduces the labour costs involved.
4. Reduction of price mark-downs
Fashion retailers plan their budget every season for item procurement and distribution to the stores. Logistics is mainly push-oriented. The leftovers are discounted at the end of the season with high markdowns mainly because they are the least desirable items for regular customers. A system with item-level turnover planning and inventory control makes it possible to monitor sales development from day one. Hence if the price markdowns are started during the season, the overall markdowns will be lower.
5. Reduction impulse buying of loss leadership
Often there is no match between the logistic requirements and commercial requirements. Logistics managers prefer low distribution and low delivery frequencies and commercial managers prefer low store inventories, low out-of-stocks and High delivery frequencies. The only solution for this is to opt for high delivery frequencies to stores in combination with concentrated deliveries via a single channel. This is a win-win situation for both the stores and logistics. That being said, high delivery frequencies are not sufficient to prevent a costly problem in stores. Hence Retailers require Item-level inventory control as a part of the Automatic store replenishment system to ensure low inventory levels and low visibility on shelves, in combination with an extra backroom stock.
The potential results of Automatic Store Replenishment are high. Fashion Retailers stand to gain more because they have the potential to a cut-back inexpensive price mark-down. The benefits are lifelong and hence retailers should opt for the long-term use of the software. That being said, a few factors are critical for Auto replenishment systems to be successful and they are:
· Data integrity at the start of implementation
· Developing the correct forecasting and order algorithms and avoidance of manual order corrections
· Usage of automatic store replenishment information for maximum benefits.
These critical factors must be managed in order to achieve positive results. Hence retailers require the assistance from experienced implementers like Ginesys in order to ensure that everything is done correctly.