Is This the End of Multi-Echelon Inventory Optimization?

In today’s connected commerce world, consumers are demanding more convenient fulfillment options and as the shopper experiences get more complex, there is a need to profitably optimize inventory management for omnichannel.

Transforming the Retail World

“The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking.” – Albert Einstein

The emergence of ecommerce has transformed everything about the retail world: How customers search for products. Where they buy. The ways they take delivery. And what their expectations are throughout the entire shopping experience.

The explosion of digital sales is only continuing to grow. According to a U.S. Census Bureau report, online commerce in the U.S. has expanded from $230 billion in 2012 to nearly $460 billion in 2017, with even more growth expected in 2018 and every year beyond.

Source: CBRE Ecommerce retail sales hit $453.5 billion in 2017, as brands invest in omnichannel

Today, customers demand omnichannel shopping experiences including mobile purchases, buying online and pick-up in store, ship to store, ship to home, curbside pickup, returning online purchases in store, two-day shipping, same-day shipping and next-day delivery.

In short, consumers expect to be able to buy and return anything, on any channel, on any timeline of their choosing. As a result, retailers have transformed fulfillment capabilities to meet those expectations.

But here’s the key question: Can you successfully implement omnichannel fulfillment and maximize profitably?

The answer is yes, maybe. Yes, it can be done. But only by taking a cue from Einstein and changing our thinking about it. The focus also needs to be on the other side of the equation: inventory.

Current Technology is Only a Partial Solution

At the outset of ecommerce, retailers had an idea of how much product customers would buy but had to figure out how they would buy it.

For years, most retailers relied on multi-echelon inventory optimization to ensure they streamlined inventory supply across the entire network in order to fully realize sales opportunities.

For a while, that technology worked really well. Organizations gained alignment of supply and demand across the network, with network inventory transparency and optimization of demand by channel.

Then shopping and shoppers changed. Ecommerce exploded. Fulfillment options expanded. And the shortcomings of multi-echelon inventory optimization began to be exposed.

Those solutions weren’t built with today’s retail realities in mind. In today’s anytime, anywhere world, multi-echelon technology offers no insight and gives no consideration to the many unique fulfillment experiences available to shoppers. That’s a problem.

In addition, multi-echelon technology only provides a limited understanding of demand.

For example, when someone orders a product online and it’s shipped from a retail store, who gets credit for that demand? Should the demand be realized at the fulfillment location or the demand location?

Often the answer depends on both your fulfillment strategy and your inventory strategy. If the store fulfilled the order because the distribution center was out of stock, likely the DC deserves the credit. If the store fulfilled the order because of a strategic decision to leverage the closest store for next day delivery, possibly the store deserves the credit.

In each case, the fulfillment experience matters. The inventory strategy matters. Gaining insights into all of them – and adjusting inventory accordingly – is the key to profitability.

A New Solution for Today’s Retail Reality

It’s an omnichannel world and we’re all operating in it. A lot of work has been put into new fulfillment strategies.

However, to gain the most profitability, focus also needs to be on the inventory side of the equation. Multi-echelon inventory management still has value, but it’s not enough.

In order to thrive in today’s complicated retail environment, many retailers are turning to Manhattan’s Omnichannel Inventory Optimization (OIO).

This first-of-its-kind approach takes full advantage of all factors – network inventory, channel demand patterns and omnichannel fulfillment strategies – to better align inventory across the network.

The result is lower costs, greater efficiency and a higher return on your inventory assets. OIO rebalances the fulfillment/inventory equation so you can offer the best possible shopper experience at the lowest cost to your business.

A new day in retail has created a whole new set of challenges. You need a new kind of technology to meet them.

The Evolution of Inventory Optimization

How much inventory is needed to meet our customer service objectives? This is the fundamental question inventory optimization solutions have attempted to answer since the advent of advanced replenishment.

Download Enter the Era of Omni Inventory Optimization
  • THEN In the early days, buyers ordered inventory based on their best guess of upcoming demand at a single location. This approach often resulted in the ‘bullwhip effect’, where forecasts distorted - and orders inflated - as they moved up the supply chain. Managing inventory from the bottom up became increasingly costly and ineffective as retail organizations grew.
  • NOW In the 2000s, as the retail environment became more complex, the multi-echelon methodology took hold. Replacing traditional systems, multi-echelon solutions enabled a bi-directional, network approach to inventory optimization that continually updates stock at every level in the supply chain, bringing transparency to the process.
  • NEXT The next generation of inventory optimization is omnichannel, advancing multi-echelon concepts to fully embrace digital commerce and changing consumer fulfillment preferences. Omnichannel recognizes that inventory is consumed differently today, making it possible for retailers to better compete in the new era.

Download the whitepaper "Enter the Era of Omni Inventory Optimization" and learn how OIO can help ensure your inventory is in the right place at the right time to meet customer demand.

Article Topics

Manhattan Associates News & Resources

enVista joins Manhattan Associates’ partner program as Gold Partner
How WES is changing the game for fulfillment centers
Labor Management as a dynamic tool
Manhattan Associates introduces new transportation management offering
Lands’ End selects Manhattan Associates’ solution to optimize distribution and transportation
Manhattan Associates partners with Loadsmart on dynamic pricing and capacity sourcing
Labor Management Systems Solutions Increasingly Important Even With the Move to More Automation
More Manhattan Associates

Latest in Supply Chain

Investment Triggers a Manufacturing Supercycle
Supply Chains Struggle to Access Reliable Emissions Data from Suppliers
Artificial Intelligence to Drive M&A Activity in Supply Chain
Cleo Announces New Supply Chain Management Tools for Integration Cloud Platform
ASCM Honors Supply Chain Management Leaders with Awards of Excellence
US Container Traffic Boosted by Back-to-School Rush
Bank of America Introduces Digital Supply Chain Finance Platform
More Supply Chain
Inventory Management
Inventory Optimization

Manhattan Associates is a best-in-class global solutions provider for supply chain leaders- organizations intent on creating enduring market advantages by leveraging their supply chains. We help our customers successfully manage accelerating and fluctuating market demands, as well as master the increasing complexity and volatility of their local and global supply chains.

View Manhattan Associates company profile


Featured Downloads

Becoming a Shipper of Choice
Becoming a Shipper of Choice
C3 solutions' scheduling software streamlines the shipping process.
Thinking Differently About Supply Chain Planning
Thinking Differently About Supply Chain Planning
Political landscapes shift overnight, global trade is constantly changing, consumers demand increasingly personalized service and smaller day-to-day challenges hit without warning. If...

Rapidly Improve the Performance of Your Warehouse Logistics
Rapidly Improve the Performance of Your Warehouse Logistics
The Rapid Performance Evaluation identifies opportunities and potential improvements in every aspect of warehouse logistics operations; performance, productivity, service, quality, and systems.
Resource Management System (RMS): How to Effectively Leverage Your Assets
Resource Management System (RMS): How to Effectively Leverage Your Assets
This guide provides an in-depth analysis of the potential of various resources available in a warehouse and how they can be utilized...
Sustainable Supply Chain Insights From PITT OHIO
Sustainable Supply Chain Insights From PITT OHIO
A whitepaper on supply chain insights gleaned at the LEED-certified gold Cleveland transportation and sustainability summit.