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Supply Chain Opinion
Win in a
flat world
Now is the time to take a fresh look at how best
to classify inventory in the world of e-commerce,
write Gopikrishnan GR, head of supply chain
management practice, Infosys, Madhavan K
Vasantham, Infosys SCM consultant, and Business-to-consumer e-commerce growth
Rajkumar B, Infosys SCM consultant.
comes at a cost. There are already
widespread worries around increasing
customer dissatisfaction from slow online
shopping websites, and the reasons for this
span the entire fulfilment cycle.
usiness-to-consumer (B2C) the upload of the entire inventory
B
e-commerce continues its picture into the e-commerce front-
double-digit, year-on-year growth end, or the shopper making synchronous Within the order life cycle, inventory is
as sales patterns shift from inventory checks from the browser for each checked at two points; first when the shopper
conventional avenues such as item in the cart. The trade-off with this deign makes an item choice (‘Add to Cart’) and later
stores to online channels. This is even more approach has been an exponential increase in during item confirmation (‘Availability Check
pronounced since online shoppers have been the load on websites and the resultant shopper and Reservation’). Consequently, these two
found to be less sensitive to real or perceived frustrations with longer and unreliable order workflow steps end up being the most time-
adverse economic conditions. However, this taking cycles. Reliability or performance? This consuming processes for the online shopper.
growth comes at a cost. There are already has become a ‘catch 22’ situation for retailers.
widespread worries around increasing In terms of inventory policies, websites
customer dissatisfaction from slow online So let’s take a fresh look at optimising these currently use the following rule:
shopping websites, and the reasons for this two constraint variables (fulfilment accuracy Inventory is assumed to be ‘Available-to-
span the entire fulfilment cycle. The result can versus shopping cart performance) by adopting Promise’ if present in any of the warehouses
be high shopping cart abandonment, which a differentiated strategy for inventory visibility. (all Distribution Centres (DCs) – Regular
mostly translates to store abandonment as well. We feel that our approach – built around the or Drop Ship). This check happens during
principles of ABC classification of inventory the ‘Add to Cart’ phase.
A study by global Millennia Marketing
1
and redesign of Available-to-Promise (ATP) Inventory can be reserved against the order
highlights long checkout process as one of rules and inventory refresh frequencies – would only when available at the warehouse from
the top reasons for shopping cart abandon - lead to quicker response time at the web front where it can be shipped.
ment, with 44 per cent of users citing this. end and significant decline in abandonment
With inventory checking emerging as the key cases (see Chart A). In this approach, all orders or order lines have
bottleneck within the fulfilment process, to undergo mandatory
retailers have been forced to re-think their inventory checks at the
TRADITIONAL E-COMMERCE ORDERING PROCESS FLOW
inventory availability strategies to achieve back-end, forcing
faster web browsing without compromising capture/update of
on assured on-time deliveries. Their problems inventory position for
have been compounded by the fact that the each and every item.
sum total of product variants offered by these
websites translates to over a million SKUs Classification of
whose fulfilment complexities need to be inventory – which
managed at the back end. inventory needs
visibility the most?
Until now, online retailing businesses had Traditionally, the basic
metrics built around the primary focus area of principle governing
on-time delivery. In fulfilment terms, this inventory management
resulted in one of two sub-optimal scenarios;
Chart A demonstrates the generic life cycle of an e-commerce order.
has been ABC Analysis, >>
46
MANUFACTURING
&LOGISTICSIT May 2009
www.logisticsit.com
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