Relocation reverberations: How pandemic moves have impacted demand and inventory management

Many people have relocated over the last year, as closed offices and increased remote working options enable more flexible living arrangements. With a shift of population to new places, particularly from large urban city centers to other suburban areas, retailers may be struggling to position their inventory based on historical data trends. For instance, an area that previously may not have performed well, may be over-indexing simply because more people have moved to the area during the pandemic and may be experiencing stockouts since inventory was not positioned for this shift. How can a retailer know how much inventory to position and where, when demographics are rapidly changing as a result of the pandemic?

Aside from population-based demand changes, retailers also have been tasked with anticipating demand shifts from increased online shopping, decreased brand loyalty, and other shopping trends. Inventory allocation has never been easy, but a less clear picture of demand makes forecasting, planning and allocation increasingly complicated.

What is demand planning?

Demand planning is a critical process for supply chain management during which a company projects future demand, and therefore shifts output to meet those projections. With accurate forecasting of customer demand and sales, they can better plan for how much inventory to order or produce, as well as where to allocate that inventory across locations to ensure they can meet demand. Accuracy is necessary to efficiently balance inventory. By situating inventory where it is needed most, retailers can meet demand without excess carrying costs, or disappointing customers with backorders or out-of-stock situations.

How has the demand picture gotten more complicated since 2020?

A significant number of US offices remain closed for in-person work during the pandemic, with 41.8% of the American workforce currently working remotely. Without a need to be in person for work, many employees in the US have discovered that they can be anywhere and still get the job done. In addition, with financial challenges and unexpected layoffs, many reconsidered their city lifestyle and made the shift to more affordable suburban areas. In the second quarter of 2020, 51% of Realtor.com’s property searches from city residents in the 100 largest U.S. metro areas were for homes in the suburbs of those areas, a record high for the site. There has been a noticeable “urban shuffle”, with people leaving big, densely populated areas in favor of suburbs and smaller communities across the country.

On top of that, the flow of people into core US metro areas showed a net decrease – indicating not only that people were moving out, but that fewer residents were moving in. According to Bloomberg, 82% of urban centers saw more people move out than in, with 91% of suburban counties seeing the opposite. And, based on USPS address change requests, over 15.9 million people have moved since February 2020.

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Demand forecasts and inventory allocation directly impact stock and availability across different retail locations around the country. However, with shifting populations, previous demand estimates using historical data may no longer be enough to efficiently situate inventory. For instance, in New York City (NYC), some residents took the pandemic as an opportunity to move out of the city center and into neighboring suburbs within commuting distance of the city or even to warmer areas across the country. In total, 320,000 people left NYC in 2020, a 237% increase from the year before. A retailer who allocated significant inventory in NYC may face excess carrying costs if their inventory allocation didn’t consider pandemic-related population and demand shifts.

To complicate inventory management further, previously forecasted demand for in-store sales has been dramatically impacted by the growth of eCommerce. In late 2020, 23% of consumers reported that they were doing all or most of their shopping online, and that this was a change from their pre-COVID shopping patterns. With rising online demand that may be here to stay, estimating in-store demand and inventory gets challenging. In addition, in-store cart conversion is now impacted by online inventory availability. Customers are taking another step before purchasing in store: checking in-store availability online. Retailers must provide accurate inventory estimations online to keep customers coming to stores, since 33% of US adults are less likely to visit a store at all if they can’t confirm online first that what they want to buy is available in-store.

What does this mean for retailers?

As the pandemic exposed flaws across many supply chains, retailers are emerging with a strong focus on resilience and building smarter, more dynamic supply chains that can react quickly to disruptions and better match supply to demand. With volatile and unpredictable customer demand at store locations, the best thing retailers can do is become more agile to react when change happens, and to establish best practices to keep customers satisfied.

A real-time view of inventory across store locations, warehouses, and in-transit enables retailers to identify mismatches between demand and inventory availability faster. Today, modern inventory management solutions alert users instantly when inventory is over-stock or below safety stock thresholds, helping retailers take immediate action to rebalance. And, with demand shifting across store locations, retailers can monitor inventory levels and reallocate inventory to locations where demand may be higher.

Using AI technology for order management and fulfillment ensures retailers are optimizing inventory and using it at its most profitable price point, continuously learning and improving outcomes for omnichannel fulfillment. With a combination of AI and an enterprise-wide inventory view, retailers can easily identify inventory in stores where inventory is obsolete or slow moving, and prioritize it to fulfill eCommerce demand to improve inventory sell-through. With full use of enterprise-wide inventory, retailers can ensure they are meeting demand in the most profitable way, no matter how demand shifts have impacted their retail locations.

Regardless of demand shifts, retailer indication of available in-store inventory online is becoming a pre-requisite for brick-and-mortar sales. To better stabilize in-store demand, retailers must meet the modern customers’ changing needs for transparency and certainty in shopping experiences. Retailers should look to increase online transparency of inventory availability for all omnichannel touchpoints like curbside pickup, in-store purchasing, or delivery, using intelligent promising software. With sophisticated inventory promising software, retailers can improve in-store sales, as well as digital conversions, while increasing profitability.

Source: ibm.com