Recent research from IHL placed the cost of inventory distortion for global retailers at $1.7 trillion.
That’s roughly the size of Australia’s entire GDP or just over $200 for every person on Earth. So pretty big.
What is inventory distortion?
Inventory distortion is the combined total cost to the business of overstocks and out-of-stocks.
A few factors cause it:
- Human error: Manual inventory counting can be prone to errors, such as miscounting items or forgetting to count items entirely.
- Theft: Inventory can be stolen by employees, customers, or suppliers.
- Damage: Inventory can be damaged during shipping, storage, or handling.
- Obsolescence: Inventory can spoil or be out of season.
- Poor demand forecasting and supply chain management.
Inventory distortion impacts
Inventory distortion can have a significant impact on retailers’ bottom line. When retailers have too much inventory, they must pay for storage and insurance costs. Additionally, excess inventory can lead to markdowns, discounts, and even the destruction of goods, reducing profit margins.
When retailers have too little inventory, they risk losing sales and damaging their customer relationships.
An overlooked problem – data capture
The process of collecting and digitizing information from the physical world (aka data capture) is often overlooked in its importance. It’s relatively easy to analyze data from e-commerce operations. Less so when the process involves scanning thousands of SKUs when managing inventory.
Most current data capture workflows suffer from two elements:
Processes to capture data are outdated and inefficient
Receiving goods or counting inventory still relies heavily on manual processes. Scanning items one by one takes time and can involve human error.
Real-time data is not available to those who need it
Decision-making is hampered by a lack of access to real-time data. Often due to devices that can’t connect to systems and provide feedback or poorly defined processes.
When combined, store operations become inefficient and decision-making becomes slow and unreliable. Contributing to the causes of inventory distortion.
How Scandit Smart Data Capture helps
While supplier issues account for almost 25% of inventory distortion, a large percentage of the gap is due to inaccuracies and errors when items are being received and transitioning through stores into the hands of customers.
Scandit Smart Data Capture gives associates the ability to capture data intelligently from multiple sources. It enables task automation and real-time decision-making at scale. And it works on any smart device, so it’s an easy and cost-effective way to provide associates with the right tools to tackle inventory distortion. Here are 5 ways it helps:
1. Accurate receiving
If you want accurate inventory levels, then a good place to start is receiving. Ensure accuracy when goods arrive and retailers have a better starting point when inventory moves through stores. However, it can be tedious and time-consuming to count every item. Some receiving workflows employed only count 10 or 20% of items that arrive, with the shipping manifest doing the rest of the work.
MatrixScan Count is a lightning-fast multiple barcode scanner solution that makes receiving workflows up to 10x faster. With this level of automation, all items can be checked as they enter the store and any discrepancies immediately identified.
2. Easier and faster cycle counting
The same speed and accuracy that comes with MatrixScan Count can be applied to spot checks and cycle counting too. This means that another time-consuming task can be carried out more frequently.
This allows retailers to monitor continuously that other stock-keeping efforts are accurate – and find out quickly if factors such as theft might be having an impact on stock levels. With more regular and accurate checks, retailers can address minor inventory distortions before they hamper business.
3. Prevent human error
Unfortunately, humans do make mistakes. Miscounting or not counting items makes a large contribution to inventory distortion. In a pressurized retail environment, store associates have an ever-increasing list of tasks to do. Inevitably, things get missed.
We know this at Scandit, so we have built-in workflow assistance in our tools to alert store associates to failed scans or discrepancies that can immediately be actioned. Feedback is provided visually using augmented reality on the device screen and by sound and haptic responses to ensure it doesn’t get missed.
4. Precise e-commerce fulfillment
Statista puts e-commerce at nearly 20% of total retail sales worldwide. This means inventory distortion is a multi-billion dollar problem for the e-commerce industry. So automating fulfillment efforts to ensure precision and eliminate human error is big business.
Being able to locate the right item to be picked and in the right order, keeps fresh produce from spoiling and ensures that inventory levels remain accurate. MatrixScan Find uses augmented reality to help find products instantly and make errors almost impossible.
5. Real-time data
As store associates go about their daily tasks, they can constantly capture data about inventory levels and feed it back to a central system. Discrepancies can be identified by store associates on the fly and inventory management systems updated to resolve them.
Access to a single source of truth empowers everyone to keep an eye on stock levels to support demand forecasting and reduce inventory distortion.
If you’d like to know more about how our Smart Data Capture Solutions can unlock next-level business efficiency and improve inventory management you can find out here.