Efficient inventory allocation: a key to retail success
5 min

Efficient inventory allocation: a key to retail success

In an industry where consumers want goods as quickly as possible, efficiency is critical. Especially when it comes to inventory allocation.

You can have great load speeds on your website and a seamless checkout, but that’s worth nothing if you can’t get goods to customers quickly.

Could your system for allocating inventory work harder? If you’re not following the latest order orchestration methods, there’s likely to be room for improvement.

What’s the impact of poor inventory allocation?

Order management is a cornerstone of profitable retailing, as the impact of poor allocation can be felt twice over.

Operationally, poor inventory allocation practices can mean it’s costing you more to fulfil orders than you need to spend. And from a customer perspective, stockouts caused by poor decisions can impact satisfaction and loyalty.

An original research study conducted by OneStock found that 62% of shoppers will switch retailers if they find a product is unavailable, while 31% say they’re less loyal to retailers whose products are regularly out of stock.

In addition to internal costs and customer expectations, inventory allocation challenges can leave your business with excess stock at the end of the season: another profit drain.

Of course, most retailers already know the impact of poor inventory management and want to avoid it. From our experience, changing your approach to allocating orders could be the key to retail success.

Is it time to rethink your strategy for stock allocation?

Most retailers automate inventory allocation using a retail order management system, which they trust to make intelligent decisions on their behalf. However, your choice of OMS software can hugely impact how efficiently you orchestrate customer orders.

Retail OMS systems use a set of orchestration rules to determine the ideal stock point for every order (warehouse, stores, drop ship from suppliers and other locations). These rules can include stock levels, capacity, operating hours, backup stock, internal stock versus via a third-party supplier, customer delivery requirements and more.

Traditionally, most OMS software uses a ‘waterfall’ process to determine the most suitable point of fulfilment.

For example: the system decides that a particular store is the best location, and order details are sent to that store to accept or decline.

The waterfall method works fine if the first stock point accepts the order. But what happens if they can’t process it? Sometimes, the order is automatically reassigned to another store after a few hours if it’s neither accepted nor declined. Yet, with some OMS systems, the store must manually decline the initial order for a follow-up action to take place, so it can take several hours to process a customer order successfully.

This approach also assumes that your order management software can incorporate store fulfilment. Legacy OMS systems may not even have a ship from store feature, and they may be unable to see real-time information that can influence order allocation—for example, whether slow-moving stock in certain stores can be repurposed for online order fulfilment.

Is there a more dynamic way to orchestrate orders?

Unlike most vendors, OneStock takes a different approach to order orchestration—which we call competitive order allocation.

Retailers using our distributed OMS software can send the same order to several fulfilment locations that fit their orchestration rules. Whoever first accepts that order will fulfil it, and the order details are removed from other stock points’ listings. It’s similar to Uber and Deliveroo’s business model, but for retail fulfilment.

Competitive order allocation works better than the standard waterfall method because:

  • Orders are allocated to ALL appropriate stock points, not just one, so they’re constantly in motion
  • It maximises customer fulfilment options while protecting sales channels from stockouts
  • Staff are deeply engaged with order management as they want to be the first to accept orders and hit their targets
  • It eliminates favouritism as allocation is based on pre-set orchestration rules
  • OMS software can calculate the orders captured-to-abandoned ratio, preventing stock points from over-committing to orders that they can’t fulfil
  • It keeps store staff busy during periods of low foot traffic (while making the best use of store inventory)
  • It prioritises speed of fulfilment to provide an impressive customer experience

Taking a holistic approach to order allocation can also solve problems quickly. For example, if a store accepts an order but finds one item is out of stock, it can cancel the order, which goes back into play for another store to pick up. Or, if order orchestration rules allow split shipments, it can send the items in stock, and the remaining items can be dispatched from another stock location.

Read more about order allocation: is your orchestrator already old news?

OneStock: leaders in competitive order allocation

OneStock isn’t just an advocate of competitive order allocation; we invented the term!

It’s the best way to describe our process for effortlessly dispatching orders from the most profitable stock point without disrupting in-channel sales or breaking customer delivery promises.

Our customers gain real-time visibility into inventory levels to make intelligent decisions about the best fulfilment location for every order. OneStock OMS also includes integrated reporting and analytics capabilities to benchmark each stock point’s performance and drive retail success.

OneStock customers report:

  • Greater availability: OneStock customers have an average product unavailability rate of 12%, compared to 31% industry average
  • Higher turnover: on average, OneStock customers increase their ecommerce sales by 25% after onboarding our retail OMS software
  • More efficient use of inventory: 22% of ecommerce orders are prepared by stores when retailers use OneStock technology

Plus, our retail OMS is easy for non-technical staff to operate.

Learn more about order orchestration or book your free, no-obligation OneStock demo to experience competitive order allocation for your retail business.

Further reading