Bad Inventory Management Makes Kermit a Sad Shopper

Inefficient Inventory Management Systems that cause accidental backorders just break Kermit’s little heart

Has this ever happened to you? Your neighbor bought a certain car, and all of a sudden you notice the exact make, model, and color all around town? Or maybe you decided to get a new phone, and next thing you know everyone on the planet seems to have that exact same one? It’s just like that car game that kids play on road trips, when they start counting brown cows and it feels like all bovines in a three-mile radius are quickly showering in hair dye behind the barn before you turn the corner.

The same thing has been happening to me lately, but with two different things. First, hearing stories of disappointing customer experiences due to bad inventory management, and second, pictures of Kermit the frog having a good ol’ cry after he’s finished shopping for who knows what, that seem to have become quite the online meme. I may not have an answer to the “Why bawling Kermit meme?” question yet, but it’s clear to me where my unusual sensitivity to bad shopping experiences stems from: I know just how easily avoidable they are.

Before we can even think to declare the dawn of a new age in computer science, economics and overall human evolution, we first need to make sure we’ve got our basic algebra covered.

Since “shopping experience” and “customer experience” are to some extent interchangeable, I’ll stick to the one eCommerce situation I most commonly hear about that is not subjective at all, and rather has everything to do with a retailer’s Inventory Management System. Although the subjective stuff is hugely important (and becoming more measurable every day), I want to focus on something much more black-and-white: do you have the product to send me now, or don’t you? You either have product X, or you don’t; you either have Y amount of it, or you don’t; you either have that product in Z location (brick-and-mortar, warehouse etc.), or your don’t. Because if you don’t, but claim you do by mistake, then we don’t want to try and order it.

This situation that I keep hearing about again and again is the following: someone goes online to shop for a specific product. This person is looking for a product that she knows she wants, she’s been through the whole searching and comparison phase, she’s made the decision to buy. AND, importantly, her decision is to buy it from a particular eCommerce store. The problem is, the store fails miserably.

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The Promised Product and The Shipping Conundrum

Kenneth ordered a zipper hoodie in black, and the store emailed him to ask if he wouldn’t prefer a blue one instead – but only after several days  of postponing the shipping of the initial product from one day to another. Anil ordered his dream coffee-maker from a store that promised two-day shipping, only to eventually cancel this order 10 days later because by this point he had already ridden his motorcycle to a local specialty store and made the purchase in person. And the stories go on, and on…

The culprit here is obvious, and goes beyond just bad communication on the part of some of entity or individual. The true culprit is ineffective Inventory Management.

Ideally — and the way we do it here at HotWax Systems –, Inventory should be tracked in both  the QOH (“Quantity on Hand”) and the ATP (“Available to Promise”) dimensions. This means that once a product has been ordered by an online customer, for example, the systems shows that it is reserved, or promised, and it is therefore removed from the count of stock that is available to promise. Of course, this ATP-1 calculation takes place even though physically it is still in the warehouse. That’s as it should be: unless Flash Gordon is handling pick waves, it’s safe to assume that between the exact moment when the order was placed and that when someone will have picked, packed and shipped it, there will be a period of time when the product is in this status.

That 1-hour, -day, -year interval, however long, is tricky for companies who don’t use Unified Commerce Systems with QOH and ATP differentiation capabilities, because that’s when backorders happen. Half-done and poorly-managed integrations between incoming order, inventory and warehousing systems, and accounting systems make it a Herculean task for most companies to figure out how to remove ordered-but-not-yet-shipped products from the available-to-purchase stock count, but still keep it in the accounting system until it is physically out of the company’s possession. That’s one thing that HotWax Commerce does, and does well, but until we reach world domination (fingers crossed) even we have to sometimes deal with retailers that don’t use our unified commerce systems (yet!).

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There’s little satisfaction in the thought that we can, and others can’t. It’s concerning how few offer this functionality, to be honest. Just a couple of weeks ago, mentioned a study where 84% of responding CXOs said outdated legacy digital platforms prevent their organizations’ ability to improve digital experience. All of this in spite of the increasing demand for seamless digital experiences at every step of the customer journey on the part of said customers. Business of Fashion recently discussed the fails of customer experience – not only the new frontier of competitive differentiation, but also the future of how physical retailers will generate revenue. Experiences won’t just sell products – they’re bound to become the products themselves.

While numerous other publications excitably mull over the future of retail, filled with AI, IoT & Machine Learning, our present customer experiences are still at the level where we’re really hoping to get that one thing we ordered in the color we ordered, and preferably before Labor Day, if we ordered in March! Before we can even think to declare the dawn of a new age in computer science, economics and overall human evolution, we first need to make sure we’ve got our basic algebra covered: If I have two apples and you ask me for one, how many apples do I have left? “One apple ATP and two apples QOH until one of them leaves my hand” is the modern-day answer.

If your Inventory Management System is not well integrated, or if it doesn’t offer all that much, rest assured that ours does, and we also aim for a 90-day implementation period for a fully Unified Commerce System. Just know that I’m saying this as a customer, on behalf of my fellow customer-colleagues and that of Kermit, who I’m now realizing is heartbroken because he ordered something online, and it never got sent.

DATE: Mar 17, 2017
AUTHOR: Anca Matcovschi
Inventory & Product Management, Anca Matcovschi