The retail industry has been struggling for years, even decades with a major challenge—the siloed nature of operations. Traditionally, sales, supply chain, and production functions have worked in isolation, leading to inefficiencies, misaligned processes, and missed opportunities for growth. It also affects employee morale and their ability to focus on important tasks. These disconnected systems result in inventory imbalances, production delays, and a lack of visibility across operations.
At the same time, a significant opportunity is emerging. Integrated demand, the use of artificial intelligence and machine learning, and inventory planning systems are redefining how businesses approach operations. By breaking down traditional silos, these systems enable seamless collaboration between teams, fostering smarter decision-making and streamlined processes.
The critical question for businesses now is, how can they bridge the gap between forecasting demand and aligning production with real-time collaboration? Solving this challenge requires advanced tools and a shift in mindset. Retailers need to view the supply chain, demand planning, and production as interconnected pieces of a larger, unified strategy.
A Look at the Data: Retail Silos
Silos can be the most costly problems in today’s market. For example, Nike reported holding $9.7 billion in excess inventory in late 2022. That’s an increase of 44% from the previous year and a staggering figure demonstrating just how tough inventory management can be for one of the biggest brands.
Most of us know the results. By 2023 Nike announced an aggressive $2 billion cost-cutting program and employee layoffs. The stock plummeted 12% in a single day following these measures, and gross margins dropped from 45.9% to 42.9% year-over-year. Current global estimates reveal that the global retail industry loses approximately $1.75 trillion annually due to out-of-stock items, representing about 8.3% of total retail sales.
The Evolution of Inventory Management from Sales Planning to Production
Traditionally, inventory management has centered around sales planning and revenue forecasting, with businesses striving to predict how much product they could sell and where those sales would occur. While these projections provided valuable insights, they often stopped short of addressing the next critical step: translating forecasts into actionable production plans. This gap left supply chain and production teams scrambling to meet demand, resulting in inefficiencies, inventory surpluses, or shortages that impacted profitability and customer satisfaction.
Key Features of Modern Solutions
Modern inventory management solutions are designed to address the needs of today’s dynamic retail environment with a range of advanced features. Global functionality enables businesses to operate seamlessly across multiple currencies and locations, making these tools scalable for both small retailers and multinational enterprises.
Comprehensive planning tools provide end-to-end support, from pre-planning activities like forecasting revenue and demand to post-planning tasks such as determining production needs and allocation resources. Real-time insights further enhance decision-making by offering a clear view of inventory flow and ensuring alignment with overarching business goals. Together, these features empower retailers to streamline operations, optimize resources and respond quickly to market demands.
Solving Problems Holistically by Focusing on Upstream vs. Downstream
Effective inventory management requires a holistic approach that bridges upstream expertise with downstream integration. Upstream capabilities—such as long-term demand forecasting—enable businesses to anticipate production needs and align them with raw material and resource planning. This foresight helps prevent supply chain disruptions and ensures production efficiency. On the other hand, downstream tools focus on managing in-season inventory and making real-time production adjustments to meet evolving consumer demands. By seamlessly connecting these two ends of the inventory lifecycle, modern solutions provide businesses with a unified system that minimizes inefficiencies, reduces waste, and ensures optimal stock levels. In this industry, we know that success means that there is only one item left by the end of the selling season.
Differentiating Factors in the Market
Flexibility and complexity have become essential in inventory management solutions. Modern systems stand out by offering the ability to adapt to the unique needs of businesses, whether they are small retailers or global enterprises. Customizable solutions allow companies to address specific challenges within their supply chains, sales planning, and production processes, providing a significant edge in meeting market demands. This level of adaptability ensures that businesses can scale and pivot quickly, staying ahead in an increasingly fast-paced environment.
Equally important is the value of long-term expertise. Many legacy systems, once focused solely on sales or demand forecasting, have evolved to integrate comprehensive solutions that address both upstream and downstream processes. These platforms leverage decades of industry knowledge while incorporating modern technology—such as real-time data analytics and artificial intelligence-driven insights—to deliver more robust and efficient planning tools.
The Future of Retail Operations
The future of retail operations lies in extending planning horizons to anticipate shifts in consumer behavior before they occur. By leveraging advanced forecasting tools, businesses can move beyond short-term planning and prepare for long-term trends, ensuring they stay ahead of customer expectations and market demands. This forward-thinking approach minimizes disruptions and creates opportunities for growth. It gives us time to think and use the profits saved by using new technologies to future invest in platforms that make an impact.
Read the original article on Fashion Mannuscript here: https://issuu.com/mannpublicationsmagazines/docs/fashion_mannuscript_february_2025#:~:text=Fashion%20Mannuscript%20February%202025%20Layana%20Aguilar%20Redefines%20Fashion%20for%20the%20Next%20Generation.
To learn more about breaking down silos and improving retail operational efficiency, email us at info@7thonline.com or book a demo with our team.
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