Inventory optimization
SITUATION
Objective: Revise inventory allocation methodology to improve GMROII (gross margin return on inventory investments).
Situation:
- Brick & mortar fashion retailer with >400 stores facing sub-optimal inventory sell-through at the store & style-colour level
- The product lifecycle is longer than planned, with the % of sales occurring in liquidation season too high
- Difficulty in predicting demand at store-level for fashion products given lack of historical data
APPROACH
Analyzed fashion product receipts at style-colour level with the following metrics:
- GMROII per lifecycle week (in store and in distribution center / DC)
- Sell-through by style-colour per lifecycle week
- Initial mark-up (IMU%) per lifecycle week
- Size (SKU) coverage per lifecycle week
- Overall GMROII and sell-through fr important product categories
- Overall GMROII and sell-through by store rank (e.g. A, B, C, D stores)
DELIVERABLES
Recommendations to improve inventory allocation methodology, i.e. reducing the initial distribution and replenishing stores faster within one day
Results post-implementation :
- Improved GMROII by 36% at the store-level and by 28% globally including the DC
- Sold 12% more of total merchandise receipts
- Increased by 68% the % of merchandise sold through at week 10 of the product lifecycle at the style-colour level
- Improved the size (SKU) coverage by 2%