Smarter Inventory Planning: Why Retail Visibility Matters More Than Ever

With relentless “low stock” signs at stores and seemingly endless memes about ships stuck in canals, many retailers tried to solve the supply chain problems of the past few years with more inventory. After all, more product had to mean fewer delays, fewer problems, and less frustration, right?

Not quite. In our recent webinar, Bart De Muynck, Chief Industry Officer here at project44, and Tom Enright, Research Vice President on the Consumer Retail team at Gartner, talked about the ever-complex inventory equation — as well as what all companies can learn from innovative retailers.

The Inventory Riddle: How Much Is Too Much or Too Little?

As the supply chain continued to see more and more disruptions over the past several years, many retailers responded with more and more inventory. Consider these stats from two of the world’s largest retailers: Amazon and Walmart.


  • 2022 Inventory: $34.405B

  • 2021 Inventory: $32.64B

  • 2020 Inventory: $23.795B


  • 2022 Inventory: $56.511B

  • 2021 Inventory: $44.949B

  • 2020 Inventory: $44.435B

Those are major increases and there’s no denying that the COVID-19 pandemic threw a wrench in the inventory to sales ratio for retailers. Since then, it’s been an uphill battle to get back to a normal level — with many retailers still struggling to balance inventory with the sales they’re actually making.

Too much inventory might seem like a nice problem to have, particularly for retailers who have spent years grappling with low supply, major delays, and stuck containers. However, attempting to solve disruptions with sheer quantity of inventory can cause major problems on the balance sheet.

To state it simply, increasing costs and inventory levels weaken profit margins. In turn, that negatively impacts cash flow. In many cases, retailers don’t need to solve their problems with more inventory — they need to be smarter with their inventory.

Smarter Inventory Planning: Lessons From Retailers

When it comes to thinking about the cost of inventory, many retailers take a simple approach: take the price you sold a product for minus the price you purchased the inventory for. That’s your net margin. However, Enright explains that there are actually two real costs that have been absorbed:

  • Inventory cost: What you pay to purchase the inventory from the supplier. You haven’t sold it yet, but you’ve paid something for it.

  • Fulfillment cost: What you pay to actually fulfill the order, which is a number that can vary widely depending on a lot of factors.

“It’s really important we look at those two things as two separate costs rather than simply saying, ‘Here’s my buy-in margin,’ ‘Here’s my sell margin,’ because that tends to hide some of the fulfillment issues and opportunities that retailers can start to tackle,” Enright says.

But what exactly are those opportunities? Here are a couple of things that innovative retailers are doing to reduce costs and be smarter about their inventory planning and supply chain management — rather than simply throwing more inventory at their problems.

1. Forecasting Customer Behaviors (and Fulfillment Needs)

Most retailers have plenty of data and information about the choices their customers have made. But it’s less often that they make the leap to use that information to understand what their customers will do in the future.

“This is the big opportunity in terms of understanding some of these consumer choices to optimize the way in which inventory is positioned,” explains Enright.

A customer first decides where to purchase and make their payment — in-store or online. Those who purchase online actually end up making three additional decisions (whether they realize it or not):

  • How to receive: Do they want pickup or delivery?

  • Where to receive: Where do they physically want to receive the product? In-store? In a locker box? At home?

  • When to receive: How long are they prepared to wait?

“Inventory accuracy is driven by predicting all of these elements, rather than just the payment aspect, which is what the vast majority of retailers do today,” Enright says.

By taking this more holistic view of what consumers might do in the future, you’re able to create a more accurate fulfillment forecast and have your inventory in the right spot (or, at the very least, closer to it).

That saves hassle and cost, because the only way to react to inventory in the wrong place is to either move it to the right place or purchase more — and both of those have a high cost attached to them.

2. Giving Customers Accountability In Shipping Decisions

Only one in four U.S. delivery vehicles are more than half full by weight. In fact, the average U.S. delivery vehicle is only 44% full by weight.

Why? Well, a lot of it comes back to the “we want it and we want it now” environment all retailers are operating in. They need to move fast to get consumers products as quickly as possible.

And while this rapid pace might mean that customers get their packages on their doorsteps the very next day, it has major implications on both the balance sheet and the planet.

Last-mile delivery accounts for just over 50% of the total cost of shipping and an impressive 41% of total supply chain costs. And when it comes to environmental impact, if nothing changes by 2030, experts predict a 30% increase in urban last-mile delivery emissions.

To combat this, many retailers are putting customers in the driver’s seat, so to speak. A new, sustainable shipping model asks different questions — not simply, “How quickly can I get my order and avoid shipping fees?” but, “How long am I prepared to wait if I can be incentivized to do so?”

Brands like Patagonia and Timberland have rolled out programs to incentivize customers to wait longer for their deliveries. Timberland, as one example, planted a tree every time a customer chose to have their order delivered in four to eight days versus the standard three.

Enright mentions another example of a grocer who is trying to minimize their journey times. They give customers free choice as to what day and time they want their groceries delivered — which means their trucks could hit the same zip code two or three times each day. Now, they inform customers that their neighbors have chosen a particular time slot and incentivize them with a lower delivery cost to pick an adjacent slot.

This means vehicles can be filled more efficiently and effectively — which translates to fewer vehicles on the road. It’s more cost-effective and far better for the environment.

Solving The Inventory Equation Requires Visibility

Inventory is complex — even more so when it seems like constant disruptions have become more the rule than the exception. However, it’s clear that simply investing in more inventory isn’t always the best answer.

In fact, lean inventory and correct positioning has a positive impact on cash flow and fulfillment costs.

Rather than stuffing warehouses to the gills, there are other levers that retailers can pull to optimize their supply chain, reduce costs, minimize environmental impact, and maintain a positive customer experience.

It’s an undeniably big job, and visibility is a key driver in getting it done. Fortunately, project44 gives you advanced, real-time visibility into your supply chain. You can use those insights to make data-backed decisions and stay ahead of whatever wrench could be thrown your way next.

Ready to get started? Schedule your demo of project44 today.