How to Reset Your Inventory Management Strategy

Brands and retailers have never seen anything like this — rapidly changing consumer preferences, ongoing supply chain disruptions, an influx of inventory for some, all under the cloud of a looming recession. Anticipating consumer behavior in this market is challenging. And being able to get what you need when you need it is complex, which can make inventory planning and management feel like an incredibly frustrating gamble. Inventory strategies are evolving and brands that adopt innovative tactics to overcome the challenges of this strange market will thrive in spite of current conditions and whatever uncertainties the future may hold.

It’s important to remember in these turbulent times that you don’t have to go it alone. Outsourcing can make all the difference in helping you devise and navigate new strategies to outsmart the challenges that exist in the market today, especially in inventory management and planning. Business process outsourcing firms (BPOs) and third-party logistics providers (3PLs) can help brands stay nimble and quickly adjust to the fluctuations of the market by leveling-up their game plan for distribution and fulfillment.

How Did We Get Here?

Inventory planning and management has always been a complex process; in recent years it has only become increasingly more so. Spurred by inflation and fallout from the pandemic, consumer spending and preferences have shifted quickly. The data shows that American consumers are split on how they're reacting to economic pressures. Lower income consumers are cutting back and racking up credit card debt, while wealthier consumers are still spending on luxury items which have a more agile supply chain. Brands like lululemon that cater to customers in a relatively higher income bracket report that demand for luxury products is thriving.

On top of the uncertainty that consumer behavior has presented, supply chain bottlenecks continue to make it difficult to meet the demand for certain products, or are causing significant delays in product delivery. For instance, seasonal items like Christmas decorations were showing up in the summer from last year’s ordering.

Brands and retailers have never experienced anything like this and many are seeing the effects of making inventory decisions under a cloud of uncertainty and extraordinary conditions. Fearing that they wouldn’t get inventory in time, many companies ordered goods to keep shelves full and got caught by a downturn in demand. Retailers with too much inventory are faced with shouldering the cost of storing it or marking down prices. It happened to big retailers like Macy’s, which reported a 5 percent drop in Q2 online sales. Macy’s CEO blamed the continued deterioration of consumer discretionary spending and high inventory levels.

A Scaling Solution

A BPO can support you in optimizing the flow of existing inventory. As many businesses contend with keeping up with demand, you need to strategize how and where you sell your products. For many, this means focusing on and prioritizing direct-to-consumer users, which ideally is your most profitable channel.

Partnering with a BPO offers the e-commerce know-how, vertical experience, scalability and established infrastructure needed to help you manage inventory — whether you have too much or not enough in this uncertain market. It’s estimated that logistics BPO outsourcing companies help reduce operational costs by up to 70 percent while enhancing efficiency. They can take advantage of resources across a brand’s operation, shuffling inventory and staff as needed to meet demand fluctuations — planned or unplanned.

As you leverage a multinode fulfillment footprint, a BPO can help you with an inventory strategy across channels to ensure that merchandise gets to customers as quickly as possible. This provides greater operational flexibility to maximize the ability to sell and deliver products across each of those nodes, while positioning you to quickly identify obsolete inventory.

In a digital-first world, staying on top of the latest tactics and technology driving the industry is essential to evolving your business to meet the demands of the market today and into the future. A trusted BPO partner is investing in best-in-class and emerging technology to help its clients improve efficiency, reduce costs and ultimately better meet the needs of its customers.

For example, at PFS we use advanced technology and drones to provide real-time inventory tracking that improves accuracy, efficiency and safety. One of the challenges brands and retailers face is figuring out how to sell down to the last unit without creating customer service issues. Scanning inventory from the ground to the ceiling, our drone technology captures up to 1,500 locations per hour. Allowing for tighter inventory control puts you in a better position to sell closer to zero, which is the end goal.

A BPO partner can assist and advise you on everything from industry standards, inventory management, trending consumer expectations, and the latest technological resources that enable a company to surprise and delight customers regardless of market conditions.

Best Practice Guidance

When you invest in an end-to-end outsourcing partner, a single point of contact supports all of your business needs across service areas. If you need to change packing guidelines and adjust customer service appeasements, you only have to make one call. Outsourcing allows day-to-day e-commerce operations to be managed for you, freeing up your in-house team to focus on the core competencies of your business, such as brand innovation.

BPOs are constantly adapting operations to incorporate the latest consumer preferences and ensure that the brands they support can stand out from the competition. The explosion of e-commerce has attracted a range of outsourcing providers that execute many routine operations. Providers are offering support for everything from staffing services to order fulfillment to returns processing, and everything in between. The requirements for an e-commerce operation are extensive.

Outsourcing providers are there to counsel you and have active conversations with you about what strategies you should deploy to navigate this uncertain market. A trusted BPO partner will not implement a one-size-fits-all strategy; it will make recommendations that are tailored to your brand and the experience you're trying to create for your customers.

Many businesses are struggling to figure out how to anticipate consumer spending and behavior. Leveraging the know-how of a BPO can help you with new tactics and streamline how you manage inventory across channels to meet consumer demand as it ebbs and flows.

Zach Thomann is the chief operating officer for PFS, an e-commerce fulfillment provider that facilitates each operational step of an e-commerce order in support of DTC and B2B brands and retailers.