Consultant’s Insight: Retailers invest in tech to manage inventories

Signs of improving inventory levels are emerging from retailers’ quarterly earnings announcements but retailers are unlikely to return to replenishing large quantities of inventory any time soon. Instead, retailers are utilizing technology and data analysis to manage and forecast needs . “Regarding inventory, we continue to make progress and are pleased to report that, as of the end of Q1 [period ending April 28], we have returned to normalized inventory levels,” retail brand Lands’ End Chief Executive Andrew McLean told analysts June 1. [caption id="attachment_68221" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] “As a result of our work to better match anticipated demand with supply, which is largely informed by our proprietary data, we expect that inventory levels will continue to come down and that, by the end of Q2, we will be at or below pre-pandemic levels, supporting our ability to lean into gross margin opportunities,” he said. To mitigate chances of a repeat of the pandemic-driven pendulum swinging from inventory shortages to overages in a matter of a couple of years, retailers are investing in technology tools that help identify and adapt to fluctuating customer demands and supply capacity, visibility and supplier management; and managing stock more effectively. Clothing company Levi Strauss & Co. recently implemented an updated enterprise resource planning (ERP) system in the United States to improve visibility and day-to-day management, and provide more control over costs such as inventory. “The peak of inventory is behind us, and we’re taking a prudent approach going forward, focused on moderating receipts and leaning into our ability to chase a benefit of our globally diversified supply chain,” Levi Strauss Chief Executive Chip Bergh said during a July 6 company earnings call. “Inventory management will be aided by our recent IT investments, including our ERP, enabling real-time visibility to our inventory on an omnichannel basis and across our network.” Stubborn inventory levels While some retailers note improving signs of inventory drawdown, the U.S. Census Bureau reported on June 28 that advanced retail inventories for May increased 0.8% from the previous month and 7% from May 2022. Much of the inventory increase was due to motor vehicles and parts, up 2.9% from April and up 27.3% from May 2022. Meanwhile, as reported Monday, wholesale inventories for May were unchanged from April, but up 3.7% from May 2022. Automotive and parts wholesale inventories increased 1% from April and 20.7% from May 2022. Apparel wholesale inventories declined 2% from April but were up 3.4% from May 2022. “There are two main drivers to the slowdown of our U.S. wholesale business,” Bergh said. “First, the macro effects of higher inflation and a slowing U.S. economy have put increased pressure on the price-sensitive consumer. Second, as we have mentioned for several quarters, our inventory backlog created supply chain challenges in our U.S. distribution centers, resulting in our inability to fulfill all demand. The lower fill rate resulted in higher customer out-of-stock and less newness on the floor in the last few quarters. We’re taking a number of actions to address these issues, regain competitiveness and restore growth to our U.S. wholesale business.” Inventories are expected to trend downward, with variations depending on the type of inventory and on how quickly inventories level off, in addition to individual companies’ strategies regarding how much stock to keep on hand for just-in-case purposes. Join Air Cargo Next for the second Air Cargo Tech Summit on Monday, Sept. 18, and Tuesday, Sept. 19, at the Brussels Marriott Hotel Grand Place in Belgium. For more information on the summit and to register, click here .

Consultant’s Insight: Retailers invest in tech to manage inventories

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