11 September, 2015

Can Smart Shelves Prevent Empty Shelves?

As we have been discussing, omni-channel retailing has the potential for incredible gains for retailers. Optimizing multiple retail channels without first optimizing the supply chain or being able to react to real time stock levels can be costly and challenging though, as mega retailer Target has demonstrated.

Since 2014, Target has made significant investments in their online and mobile ordering platforms. To remain competitive with other retailers like Amazon and Wal-Mart, and offer attractive shipping options to their customers, 350 of Target’s brick and mortar stores now act as online fulfillment centers for many of those orders. This is expected to increase to 450 stores, a full 25% of Target’s retail locations, by the end of 2015.

As a result of using their retail locations to fulfill their online orders and serve their in-person customers, Target is reporting ongoing and significant difficulties in keeping their shelves stocked. This is a drastic change from just two years ago when consumers were flocking to Target’s retail locations, as they abandoned other retailers like Wal-Mart due to the same empty shelf challenges.

It’s widely known that Wal-mart has been struggling with this for years. Wal-mart has tried to balance this problem by keeping more product stocked in the distribution centers as online ordering has increased. This results in even less stock at their stores, even though Wal-Mart executives acknowledge that resolving their under-stocking problems could be a $3 Billion opportunity.

Why would retailers put this much strain on their supply chain and brick and mortar locations? Because, according to Target’s CFO, John Mulligan, shoppers who utilize both the digital platform and retail locations shop three times as much.

The only real way address the challenges these retailers are facing is through IoT Innovation Acceleration. By instrumenting their shelves to monitor and report stock levels in real time; by integrating all of the systems with one platform to communicate with one another, from the front end shelves to the stock rooms to the distribution centers to the suppliers; by ensuring that the data being reported is accessible by all the necessary staff members; and by using the data collected to proactively identify and address problem areas as they arise.