Inventory Management and the Myth of the Retail Store's 'Back Room'

Halloween isn't quite here yet, but malls and department stores are already putting their Christmas decorations on display. These little reminders of the approaching holiday season also remind me that it's almost time to start the gift-giving.

I can remember a few times I've been out shopping around the holidays and tried to find something that wasn't on the shelves. When that happens, if it's something you really want to buy, you might go talk to one of the store's employees to see if the item you want is in the "back room."

The "back" of the store or the "back room" is sort of an illusion we create. I kind of picture it like this: You go through a normal-looking stock room door, and there before you are rows and rows of gleaming products that are just waiting for intrepid customers to find them.

For some reason, it's hidden away, but we seemed to have convinced ourselves that it is back there somewhere and surely there is still hope that we can buy it!

Most of us in supply chain management, especially in retail, know that there is no magical "back room" with extra stock just sitting there waiting for someone to ask about it. The inventory presented in the storefront is pretty much it.

There is a good reason for that: having inventory on hand costs money. In a recent Global Supply Chain Podcast series, inventory expert Ralph Cox and I talked about how increased product availability does not create additional sales for every business. This is especially true now, with web site sales as an option.

Web site purchases allow stores to make a sale even if something is out of stock. And by partnering with an excellent 3PL that can get the item to the customer with incredible speed and efficiency, not having a product in stock is no longer a major disadvantage.

Ralph and I talk more about how inventory can create profitable growth for a company, not just in retail but also for other industries, in this podcast.

Listen here for the podcast.

Jim
Tompkins Associates