For decades, the process of getting a new product on store shelves was fraught with risk. Retailers didn’t want to gamble on an unproven product. If they did, they could end up with inventory that they would need to mark down at a loss. The items could even end up in the trash.

Some items were great and would surely become hits once consumers discovered them. But if the retailer wouldn’t stock them, the supplier would take the hit for all the research, development and production costs. Sometimes the dream product died before it even made it to the stores.

Test newly launched products online first

Today, eCommerce makes launching new products so much easier. Manufacturers, suppliers and even retailers can test how newly launched products sell by first making them available on their eCommerce or marketplace sites. Online sales information can help determine whether items should be stocked on retailers’ shelves and in which stores they should be stocked.

What’s more, suppliers who are confident about their products can take the risk out of the retailer’s hands altogether, making it more likely for retailers to test the product on their eCommerce sites.

For example, say a supplier has a new cosmetic they’d like to get into stores. Retailers don’t want to take a chance on an unproven product, only for it to languish on the shelf, get marked down and sold at a loss.

By negotiating to have the new product on the retailer’s websites and taking responsibility for inventory and drop shipping, the supplier can remove much of the retailer’s risk. In this scenario, the retailer is much more likely to agree to a short trial.

Then, if the newly launched product is successful and appeals to the retailer’s customers, the retailer is more likely to order the product and put it on the shelf because it was proven online first.

Piloting the product to store shelves

Once the product has been proven online, the supplier and retailer can negotiate a pilot program and decide which stores should have the product.

It’s even possible to split products up based on customer preference, such as sending certain popular colors to stores while less popular ones go online. 

Finally, the supplier can prove their success and get the retailer to pick up all their items as part of the general inventory. Of course, this means the supplier needs access to sales and inventory data from the retailer for both in-store and online sales.

For more insights on how to maximize your success with new products, contact our team.

Ultimately, a company needs to address the following question:

How do you successfully manage your company’s inventory position to take full advantage of changing trends while being nimble enough to adapt to changing market demands?

Many companies are finding that the right balance is helped with two words: inventory information. The right information at the right time can actually replace the need for a certain layer of inventory, enabling organizations to become more flexible while continuing to meet the needs of the customer. I am not suggesting that you can put a stack of information on a truck instead of a box of products and send it to your customers. Instead, I am suggesting that the right information can be a replacement for inventory in your supply chain, whether it is in your warehouse, on the water or on your store shelves.

And that inventory information doesn’t have to be solely contained within one organization. Sharing the right information in the right manner with your supply chain partners enables them to make smarter decisions and recommendations for your business.

What types of data can help replace inventory with information?

With the right data, buying organizations can gain the confidence needed to operate with less inventory. Here are a couple of examples of how the right information can help:

• Order data: retailers often don’t have the information they need from their trading partners to know if orders will be fulfilled on time or in full. Because of the lack of data, retailers overcompensate by ordering excess safety stock. To improve visibility into order status, retailers should require suppliers to send updated order information via order acknowledgements in response to the initial order as well as any order updates as things change. For example, if a supplier determines 24 hours after they receive an order that they can ship complete, but realize later that they are short on inventory, they should share that information with the retailer. Acknowledgements allow suppliers to set expectations with buying organizations about exactly what will be delivered, and when. In addition, they allow the retailer to communicate potential corrections, such as price discrepancies.
• Shipping data: similarly, retailers often don’t have the insight they need to prepare for the arrival of the shipment, including knowing when the order will ship, how it was packed, what was packed and most importantly, what is not being delivered. This also causes the retailer to mitigate risks by ordering more inventory than they need. Implementing ship notices with trading partners is a key way to replace inventory with information. By doing so, the retailer can determine “plan B” for managing customer demand, as well as resources needed to receive the shipment and expedite the receiving process.

Reduce inventory & safety stock by having better trading partner data

The impact of a lack of inventory information runs deeper than many buying organizations realize, often tying up capital worth tens of millions of dollars each year. With better information, organizations can often reduce inventory by up to 5-20 percent by automating the exchange of critical data with their trading partner community. 

Want to learn more about how to trim inventory levels with better trading partner data? Visit our website or download our Inventory Management Playbook.