Inventory Distortion and the Value of Cycle Counting

fashionable clothing on hangers in store window


Accepting an order for inventory that isn’t there is a mistake no retailer wants to make, especially around the holidays.

As the physical store and e-commerce converge, retailers need to think about selling as much from their digital inventory as they do from their stores — and accuracy is key. In fact, with the rapid growth of buy-online-pickup-in-store (BOPIS), managing inventory available to promise is just important as managing the physical store inventory.

Traditionally retailers conduct an annual inventory that sets the system’s database in-synch with the actual physical store inventory at the beginning of the year. As time goes by, inventory distortion occurs causing degradation of accuracy and the decline in the retailers’ confidence in their on-hand availability. The solution to this problem is more frequent cycle counting to continually align system and physical inventories and maintain accuracy throughout the year.

Retailers that only rely on traditional annual inventory counts often reach an average of 65-75% accuracy in their systems of record. Because of this , they tend to buy into safety stock for fast selling items available for sale online, and pull down items from the website once they reach a specific threshold because they don’t trust the accuracy of their on hand inventory available to a customer order. This can be creating significant missed opportunities and leading to needless markdowns. Alternatively, retailers using RFID technology are able to leverage all on-hand merchandise — making it available for buy online pick-up in store or home shipment. These retailers can trust these lower inventory numbers since the back-end system is consistently updated and accuracy is maintained at a high level.

As the retail industry prepares for the holiday shopping season, it’s more important than ever to streamline your inventory. By leveraging a data-centric model, retailers are able to direct store activity so associates can work on the highest priorities, optimize operations and enhance the customer experience. By using RFID-enabled inventory management, store associates are appropriately armed with the right information and knowledge to better inform customers and elevate their shopping experiences. The ability to create, consume and utilize data gives them an advantage over competitors, and allows them to ultimately better serve their customers this holiday season.

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Posted on November 3rd, 2016

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