Macy’s conducted a study on their inventory accuracy in the late 2000’s, and found that after performing their year-end physical inventory in January, their inventory “distortion” increased by 2%-3% every month due to theft, shipping/receiving errors, cashier errors or improper returns. So, by the end of the year, their overstated/understated inventory distortion was around 36%. Said another way, their store inventory accuracy could be as low as 60%.
This number was confirmed when Dr. Bill Hardgrave, the head of the Auburn University RFID Lab (and currently the University of Memphis President), visited a well-known sporting goods chain in 2016. The company confirmed to Dr. Hardgrave that their omnichannel “pick declines” during the peak holiday season, the last 3 months of the year, were over 50%.
The term “pick decline” in omnichannel describes what happens when a ship-from-store or buy-online-pickup-in-store order is assigned to a store for fulfillment, but the store associates cannot find products on the order that the company thought were there, called available-to-promise inventory or ATP. The store must then decline either those products they do not have or the entire order.
In my almost 2 years of selling omnichannel with eBay Enterprise, I evaluated the omnichannel data from over 47 retailers, including from the above-mentioned sporting goods chain. I took their monthly omnichannel demand data and correlated it to inventory accuracy throughout the year. As the chart demonstrates, I confirmed this perfect storm of having the lowest inventory accuracy at the highest peak holiday demand for store fulfillment of omnichannel orders.
As more retailers depend on stores to not only satisfy the walk-in customer but also to fulfill the growing number of ecommerce orders, maintaining 95% inventory accuracy is critical to their success, and RFID is the best technology to help them get there.
