The Pitfalls of Poor Allocation Management

The Pitfalls of Poor Allocation Management

Allocation management is one of the most important aspects of running a fully functional supply chain. According to the 2018 State of Retail Supply Chain report published by the Retail Industry Leaders Association and Auburn University, managing allocation issues is one of the key challenges that define the market today — and rightly so. There are various risks associated with poor allocation management, and it is in the best interest of businesses to avoid them.

The first of these is profit losses. According to the report, businesses want to make sure that inventory and order fulfillment can meet demand. However, they cannot rely on perfect fulfillment from suppliers all the time. So what do they do? They enact severe measures to require suppliers to hold up their side of the contract. Key suppliers of Walmart, for instance, are required to deliver 95% on-time, in-full service if they wish to avoid a three-percent penalty on their invoice values. Target and other similar stores are also following suit.

Another major consequence is the disruption of efficiency in the whole organization. Poor allocation management is connected to several key aspects of the entire supply chain, and getting one thing wrong can have a Domino effect on the whole structure. Take demand forecasting for example; if forecasted demand was inaccurate from the very start, resource allocation towards fulfilling that demand will also suffer. The cascade of resulting losses will not only impede business flow, it may also create more issues that will demand cumbersome planning of strategic resolutions.

Thankfully, in the age of the Fourth Industrial Revolution, supply chain managers know that they can rely on data to find the ideal allocation management models that can boost efficiency, profit, and customer service. ORS delivers 4.0 software products and solutions that utilize applied Artificial Intelligence (AI) to automate decisioning and optimize all key processes of retail supply chains — including merchandize planning and retail allocation — to enable in-season replenishment and ensure that every item is in the best possible location at the exact time to maximize profits while minimizing costs.

Using ORS’ AI-driven automated decisioning solutions, our clients have optimized their allocation strategies and execution to achieve:

  • 25% reduction in store inventory
  • 10% increase in stock rotation
  • Zero stock outs
  • 50% reduction in overall inventory with no lost sales
  • $200M+ in operational savings delivered in the first year

All of our solutions can work with your legacy systems and can seamlessly integrate across all major ERP, SCM, CRM, and Financial platforms. Call us to request a demo today!

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