Invent.ai stays in tune with retailers’ take on hot industry topics and all things inventory. In this post, we’ll examine how economic uncertainty and changing customer demands lead to restructuring within inventory and supply chain teams.
Let’s dive in!
3 main reasons why more retail inventory planning teams now report to the CFO
At invent.ai, we talk with global retailers about their goals and challenges and what’s new within their organizations. Over the last few months, we’ve spotted an interesting trend: many retailers are restructuring their inventory planning and supply chain teams to better stay ahead of forecasted demand and ensure planned inventory reflects what’s actually going to sell. Namely, these teams now report to the chief financial officer (CFO).
Why the change?
Traditionally, retail inventory planning has primarily been part of supply chain and merchandising. Of course, there are always financial aspects to inventory planning. But when making decisions, planning teams usually focus on hitting KPIs—like service levels or weeks of supply in excess stock—that don’t line up with the company’s financial targets. After all, why would you consider lead times if you’re still going to order far more stock than necessary?
You wouldn’t, and the sales data you’ve been collecting can be a lifesaver in boosting your strategic decisions for effective inventory management.
The inventory planning function is now tied to the financial side of the organization. CFOs now oversee planning teams, processes, procedures, systems, and data, and everyone is trying to get on the same page to make better inventory decisions that directly improve the bottom line. Inventory has a cost that is tied to revenue and is part of company quarterly filings and investor presentations that CFOs deliver.
Factors that caused retail inventory planners to move under the CFO
1. Inventory matters more than ever
I know I’ve said it before, but I’ll keep saying it: In retail, inventory is everything. And what retailers do with inventory now matters more than ever before. Retailers know they need inventory optimization: the right inventory in the right place at the right time to keep customers happy. But far too often, retailers wind up with imbalances. Sometimes, the issue is overstock, where stores get stuck with more than they can sell. In other cases, the problem is too little inventory and early stockouts. Overall, inventory seriously impacts profitability and customer satisfaction in significant ways.
With rising capital costs, managing cash flow has become more critical than ever. And, since inventory is what drives cash flow, planning teams need to make decisions that will meet financial goals.
2. All eyes are on inventory costs
From high-end fashion retailers to dollar stores, every company is dealing with economic uncertainty and monitoring costs. And that should come as no surprise.
As CFOs look to optimize costs in every area of their business, one key area they’re focusing on is inventory optimization and inventory planning. Retailers don’t want their cash flow tied up in excess inventory. But at the same time, reducing inventory levels comes with risks. So, CFOs are tasking inventory planners with this major goal: reduce inventory investments while improving sales.
3. Omnichannel brings new cost considerations
Customers now expect seamless omnichannel experiences at every touchpoint in their shopping journeys. They want the convenience and choice of any possible combination of online and offline buying experiences. For example, some customers might want to research online and then buy in-store. Others might research in-store, buy online and have their purchases shipped to their doorstep. How well retailers can meet these omnichannel expectations is becoming a major competitive differentiator.
However, all the new ways customers can browse, buy, receive and return goods have financial implications. CFOs and inventory planning teams are collaborating to optimize every aspect of inventory planning. The goal is to ultimately make things smooth and simple for customers and profitable for the business.
Why should inventory planners embrace the change?
Change can be scary, but most inventory planning teams see it as a great opportunity. They are now being elevated to a very strategic level within the retail organization.
That said, retailers will need to equip their inventory planning teams with the tools to quantify the financial effect of their decisions. Most planners are still working with outdated systems. They have no way to calculate the true costs of metrics like lost sales or predict how certain decisions, like changing a service level target, will play out from a financial perspective. CFOs and planning teams are now looking for ways to make financially driven and optimized inventory decisions.
Invent.ai helps retailers achieve profitability with automated and profit-optimized inventory planning decisions. Customer satisfaction levels remain high because inventory is always available in the right place at the right time. With this new way, planners and CFOs are working together to reach financial targets, boost overall profitability, and increase customer satisfaction.
Ready to unlock strategic retail inventory planning? Learn more about our AI-Decisioning Platform today.