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Taking out the retail middleman – Tech takes over stock replenishment

Technology is slowly redefining every business sector under the sun, and retail is certainly no exception. But automated systems that track inventory are taking over the stock replenishment function at lightning speed and have the potential to give mid-sized retailers an advantage they haven't seen before. According to California-based retail consultant George Whalin, automatic reordering systems that have cropped up in the last few years are on the brink of revolutionizing how product gets from factory to sales floor.
September 1, 2007

Technology is slowly redefining every business sector under the sun, and retail is certainly no exception. But automated systems that track inventory are taking over the stock replenishment function at lightning speed and have the potential to give mid-sized retailers an advantage they haven’t seen before. According to California-based retail consultant George Whalin, automatic reordering systems that have cropped up in the last few years are on the brink of revolutionizing how product gets from factory to sales floor.

Although it only represents the tip of the iceberg, Whalin points to the men’s department at JCPenney as a clear example of where things are headed. Computers at individual stores communicate with an office in Asia to give an exact report of which shirt SKUs sold through in a week. The shirts are reordered automatically, and within days are shipped and restocked on the store shelf. ‘It’s cutting the process of reordering and eliminating a lot of red tape that has gone on for years,’ says Whalin. He adds that the process lends itself particularly well to the toy category, where an ill-timed out-of-stock item can quickly send customers through the doors of the competition.

‘The start-up cost is minimal when you look at the overall picture of not having the merchandise in the store when you need it,’ says Whalin, and eliminating anywhere from two to four positions in an office structure ultimately saves companies a good chunk of money. Prime candidates for making the most of automated systems are mid-sized retailers such as Coles book stores, because as Whalin explains, having a precise and immediate handle on what’s coming in is one of the keys to helping them grow and open more stores.

However, he warns that some merchandise may not jibe with automatic reordering. ‘If it’s a really hot toy that’s going to come down the pike in late October, you’re not going to put that in the system at all because you’re going to sell 5,000 in the first two or three days. So there are products that don’t fit the mold,’ says Whalin. And programming can also be an issue, when computers aren’t able to factor in finicky seasonal changes, or when paralyzing storms shut down entire regions and throw off pre-programmed reordering points.

Though automated systems can streamline operations significantly, Whalin says the process still needs a lot of attention, and ironically, doesn’t run automatically. Though he calls reordering personnel an endangered species, a computer isn’t going to make the decision to stock a new item or not, so Whalin admits that buying departments will still depend on managers who create relationships with their vendors and make tight merchandise buying decisions.

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