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What is Happening to Active Inventory Visibility?

This is an archived post from OrderDynamics, now Tecsys retail division.
What is Happening to Active Inventory Visibility? This year’s OrderDynamics Omni-2000 research had a few surprises for us. One of the biggest being a 30.7% drop in active inventory visibility among retailers. Naturally, this flagged the need to double, then triple check the observations and calculations. End result: they were accurate and consistent. Comparing the 774 retailers that were in both last and this year's research, showed a 30.7% drop. But, what is causing this? Does this make sense?

What is Active Inventory Visibility?  

First, what is active inventory visibility? Active inventory visibility is a retail website that pro-actively shows whether items are in-stock or out-of-stock. This is the most basic level of information. Better yet, some retailers provide detailed information providing the quantities available. This detailed level is more helpful to the online shopper. But, it can also be used to create a sense of urgency, on short supplies. For more on this, read the “Inventory Visibility – Who Needs It?” post.

What is Passive Stock Visibility?

In contrast, passive stock visibility is a new capability of many e-commerce systems. Here, stock availability information is only provided if it is negative. In other words, an item will only state that an item is ‘out-of-stock’ once the inventory is depleted. If the item is in-stock, then no indication takes place. Hence the term ‘passive’. The challenge with the passive form of stock visibility is that customers are not certain about availability. What happens if the website does not tell you that an item is in-stock? Here the consumer is left to guess as to whether the item is available. Worse, they may just presume that the item is not available. Alternatively, they may browse a competitor’s site. If that competitor uses active inventory visibility, it provides the consumer with more information. This will inevitably sway many customers to purchase from the place they know has the right goods.

Is This a Trend?

At first, we thought this could not possibly be right. There is too dramatic a shift, it must be a miscalculation. This leads us to investigate further. EFT’s 2017 Global Supply Chain Report shows a similar observation about active inventory visibility declining. EFT’s observation is from 2016 to 2017. Then to see this same continuation across 2017 and 2018 in the Omni-1000 to Omni-2000, is less odd. There are at least two research studies highlighting a drop in active inventory visibility. This definitely warrants keeping an eye on. Equally important are then to understand why this is happening. Moreover, is this the right direction for the industry?

Active Inventory Visibility Details

Below is a chart from the latest Omni-2000 research findings. This one specifically takes a look at the entire international set of data collected. It provides a breakdown of the retail sub-sectors and mentions the number of retail chains observed. For active inventory visibility, it provides the overall view as well as the store inventory level view. An overall view is the stock position of the chain. When a customer searches online, feedback might be ‘in-stock’. It is not clear where it is in-stock, but somewhere in the chain, the merchandise exists. This compared to the store level active inventory visibility. 22.4% of retailers provide active inventory visibility down to the store level. This lets a customer know whether travelling to the physical store will be worthwhile. Alternatively, it might let them know if they have it delivered, or they do a pickup… can they get it fast?     Our chart also shows basic versus detail. 'Basic' refers to the ‘in-stock’ or ‘out-of-stock’ indicators. It indicates what is available in that retailer’s supply chain. Detail refers to whether the retailer offers the number of units available. For example, when looking for slim fit, size 30 x 34 blue stone washed jean, how many are in stock? In our case, the retailer with detailed active inventory visibility might state there are 2 available. This adds some urgency and might get the consumer to purchase them immediately, to get one of the last two.

Analysis By Sector 

It isn’t a big surprise that chain-wide active inventory visibility is more prevalent than at the store level (detailed level). Store level stocking information requires more sophistication. The research finds that 38.1% provide basic overall active inventory visibility. This compared with 22.4% for store level stock information. Two retail sectors show a higher level of active inventory visibility. These being the Toys | Hobby | Sporting, and Electronics retail sectors. Of the 132 retail chains in Toys | Hobby | Sporting goods, 45.5% show active inventory visibility at the basic level. For the 60 Electronics retail chains, 48.3% provide active inventory visibility. Most other retail sectors are in the mid to high 30% range. One interesting exception being Health | Cosmetics. Of the 125 chains reviewed 28.0% have basic, active inventory visibility.

But the Competition…

Yes, we all know the argument. If I show my active inventory visibility online, my competitors know what I have got. Worse yet, they can map out all my inventory positions, and create a counter strategy. From this paranoid perspective, using passive stock views are the answer. Truly, this risk exists. However, there are several questions that come up. Are your competitors so sophisticated, that they can capture this information and analyze it in real-time with countervailing actions taken? Remember your inventory positions are changing every minute of every day. In-store purchases, online orders, stock losses, inbound inventory, stock transfers, and holds are all happening every minute your stores are open. It would take a highly sophisticated retailer to operationalize these competitive counter manoeuvers. Such sophistication would even give the espionage community a run for their money. This scenario is not impossible. But, is your competitor more important than your customer? All retailers should answer 'NO'. If so, then focus on what is best and easiest for your customer. The answer is to focus on active inventory visibility.

Is Active Inventory Visibility Important?

Real-time, active inventory visibility is important. Retailers can use it to create a sense of urgency with customers when there are low levels of supply. This also gives customers the reassurance that the retailer has what they want. It signals to consumers that an order won’t take 2 weeks for a delivery. It signals that they could drop into the store to pick-up their item right away. Failing to provide it puts the retailer at risk of losing customers. All shoppers research products online. Part of that research is figuring out which retailer has what you want. Online is the ultimate place to comparison shop. That means if a shopper does not understand that you have an item, they can easily search your competitor’s site. If the competitor provides active inventory visibility, with the item in-stock… well, you just lost that sale. So, the risk retailers are taking by dropping active inventory visibility … is the loss of customers. To close, the dramatic 30.7% (like for like, year over year comparison) drop in active inventory visibility is disconcerting. It is the wrong direction for retail. At such a tumultuous time in the industry, we need to focus on and cater to what works best for shoppers. Real-time, active inventory visibility is one of those keys.

Old Technology & Wrong OMS

Let's not forget there are two other options, as well. There are many retailers who either have old technology that needs replacing. This includes old legacy systems that were built in-house. Often these projects are exciting at first, but eventually, lose their lustre. They may have been good for their time, but with robust off the shelf order management technology of today, there is little need for this option. Ultimately, active inventory visibility relies on solid order management technology to drive it. Lastly, there are also the errors made in OMS selection. We don't often discuss this, but the reality is that most order management systems on the market are light solutions. They weren't designed with scale in mind, or with functional depth as the priority. Don't lose out on active inventory visibility because you made a poor choice on your OMS selection. In that light, get your copy of Will the REAL OMS Please Stand Up! In it, you will discover the importance of a robust system, and the questions to ask your vendor.

Learn more about Active Inventory Visibility

 There are several helpful resources about active inventory visibility. Read the Inventory Visibility brief, for more background. Find the real-time inventory visibility datasheet, for details about what you need as a retailer. Also find more information in our product pages, about how order management helps make this a reality. If you still have questions about it, please Contact Us. We are always delighted to answer your questions and discuss how your retail operation can improve.   Author:   Charles Dimov is VP of Marketing at OrderDynamics. Charles has 23 years experience in Marketing, Sales and Management across various IT and Technology businesses. Previous roles include Chief of Staff, Director Product Marketing, and Director Sales. Charles has held roles in brand name firms like IBM, Ericsson, HP, ADP, and OrderDynamics.
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