Wednesday, September 17, 2014

Inventory ‘Auto Replenishment’ Management

What is the one thing customers of  retail space are disappointed to see? To see that the favorite item  they are willing to purchase is ‘Out of Stock’. Retail vendors need to frequently replenish their inventory to make sure they don't run out of products listed in their website of store. However, with a recent trend in ‘Auto Replenishment’ , there has been a new trend set to deliver the products to the customers at frequent intervals and at a much subsidized price.

Let us take an example of goods we use very frequently. In this case, we know how often we use it and could plan around the ordering of this product. With the new trend of ‘Auto Replenishment’, E-retailers are able to sell the product to customers at a much lower prize for items ordered in bulk. This in turn is giving them the benefit to contact manufacturers and set expectations for sales. It is a perfect arrangement for all the parties involved in the supply chain network.

Dollar Shave Club is a Venice, CA based company that delivers razors and other personal grooming products by mail. The company positions itself as a cost-effective and convenient alternative to retail chains. It delivers razor blades on a monthly basis and offers additional grooming products for home delivery. How does a company like this manage its inventory?

As stated by the CEO of the company, he believes that the strategy to manage your inventory should go hand in hand with the growth of the company. As a startup or a growing company, the challenges can be divided into three stages.

Stage 1 - Launch:
In this stage, the company focussed on managing everything out of their office. For a company, which received around $350k funding, they were gearing up to start shipping their first customer products.. In this stage, it was worthwhile for them  to assort the product based on the target customer.
Stage 2 - Survival
When the company was in the survival stage and was shipping to customers, they outsourced this process to a warehouse and worked with a third party logistics partner to do this. Since, this is the growing stage of your business, it was important for the company to focus on other aspects.
Stage 3 - Growth
When the company was finally established and shipping to various customers, with demand forecasting techniques, they will be able to assess demand. In this stage, with the flowing customer orders it helped establish themselves as a serious customer to the third party logistics and in the process, drove down costs.

With the above strategy, the startup with bare minimum resources is able to ship tens of thousands of razors to customers in the entire North America region.


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