Getting the right products at the right time for its customers is probably the dream for any retail organisation. A supply chain scenario involving a dedicated retailer, a distributor and a manufacturer where the stock gets replenished as and when demanded by the downstream would certainly be desirable.
Retailers often have to stock up their inventory for products that they believe would experience a surge in demand. For products that they anticipate having a dip in demand, they tend to stock less. However, situations become tricky when demand is sporadic or is highly variable.
How should retailers go about satisfying demand for customers without running out of stock and thereby incurring lost sales (or) by stocking excessive stock and having to liquidate inventory at salvage throwaway prices?
Predictive analysis along with a coordination mechanism, where retailers could share information on real-time basis, helps to close this gap.
Initially, retailers are to be helped, identifying other retailers in the market, who are selling similar products. Once the demand season kicks in, they should be equipped to observe and monitor the inventory levels at their respective stores and with the aid of information sharing, they could gauge the requirements of the same product at other retail outlets.
If a retailer experiences shortage of a product at its store, the coordination mechanism along with predictive analysis could be used to find retailers who are currently experiencing/going to experience issues related to overstocking of the same product.
Once the same has been ascertained, the former retailer can have the excess stock transferred from the later retailer to its outlet. This would ensure coverage from both lost sales for the former retailer and the issues related to excess inventory for the latter. Certainly a 'win-win' situation for both!
Of course, one needs to take care of the financials that underlie such processes. The logistics cost involved during transportation, the overall warehouse capacity at various retail outlets, the profits that are to be shared between retailers must be taken into consideration. No wonder that we would see an aggregator very soon, who uses coordination mechanism and predictive analytics to consolidate the vast no: of unorganized retail stores in the country.
- Published by Media and Industry Interaction Cell (MiiC), IIM Udaipur on behalf of Amit Sinha, PGPX Class of 2018