Dynamic Inventory Targets: at scale, Item by item
Common Practice:
Retailers often rely on static and long-term predictions to set inventory targets. This common practice involves establishing fixed inventory levels based on historical data, long-term forecasting, and broad assumptions. Retailers typically determine these targets using high-level metrics such as overall sales trends or average store performance.
The Problem:
This traditional approach overlooks the intricacies of individual SKU-Location behavior and fails to capture the dynamic nature of consumer demand at a granular level. The static nature of current inventory targets poses significant challenges for retailers. By relying on long-term predictions and broad assumptions, retailers struggle with inaccurate inventory allocation, stockouts, and missed sales opportunities. The lack of real-time insights and fine-grained analysis leads to imbalances in inventory levels, as well as the risk of overstocking or understocking specific SKUs at various store locations. This outdated approach also inhibits the ability to respond promptly to changing market dynamics, resulting in reduced customer satisfaction and lost revenue potential.
What Can Be Changed:
To overcome the limitations of static inventory targets, retailers can adopt a dynamic approach that leverages real-time data and advanced algorithms. By embracing dynamic inventory targets, retailers gain the ability to capture real-time demand signals, analyze SKU-Location behavior, and adjust inventory levels accordingly. This dynamic approach allows for precise inventory optimization, ensuring that the right products are available at the right locations and in the right quantities to meet customer demand. With dynamic inventory targets, retailers can react quickly to market fluctuations, optimize stock levels, and reduce carrying costs.
The Impact:
This dynamic approach allows for precise inventory optimization, ensuring that the right products are available at the right locations and in the right quantities to meet customer demand. With dynamic inventory targets, retailers can react quickly to market fluctuations, optimize stock levels, and reduce carrying costs.
The Result:
