Distributed Logistics for Digital Commerce, Article 5: Dynamic Inventory Publishing

Using yield management to maximize ecommerce inventory ROI.

Digital commerce is about yield management.  

Traditional inventory management tends to focus on optimizing forecasting to have the right amount of inventory in the right place. The idea is to match each unit of inventory to a potential sale. A unit of product forecast to be sold at Target, for example, can’t also be forecast to be sold at Walmart.

But digital commerce adds another layer to that approach. That’s because, in digital commerce, you do have the ability to expose each unit of inventory to multiple shoppers across multiple sales channels simultaneously. You can expose the same inventory to online shoppers at target.com and walmart.com at the same time. In fact, you should be exposing that same inventory to as many shoppers in as many different listings across all the marketplaces as makes sense for reaching potential shoppers

So you need to focus on creating as much opportunity as possible for that inventory to be seen and be sold across multiple marketplaces.

That’s what yield management does: It maximizes the current opportunity, based on inventory source and location, to ensure as many online shoppers as possible are exposed to your products right now, driving sales and profits.

Dynamic inventory publishing is an important tool in making that happen.

As a brand or seller, you know how important it is to offer your product everywhere your customers shop. That means being on multiple sales channels including marketplaces like amazon.com or walmart.com, retail sites like bestbuy.com or homedepot.com, on your own branded website, and retail stores.

In past articles and videos, we’ve seen how each of these sales channels has their own requirements for publishing listings and for categorization. But they all have one thing in common: they quickly and severely will punish sellers for going out of stock and overselling.

The idea behind dynamic inventory publishing is to tell all your sales channels how much inventory you have available to sell – while minimizing the risk of overselling.

Let’s say you have 500 units of inventory across all your sources of supply.  

Smart online sellers know better than to “promise” all their inventory to their sales channels. They use a technique called “Availability Allocation” to build in margin of safety for each source of inventory. For example, they may be comfortable publishing 100% of the inventory available at their own warehouses but only publish 75% of the inventory available from a distributor because other sellers are also drawing down the distributor’s inventory. Rolling up these percentages across all their sources of inventory is kind of like a safety stock – but one based on a percentage of inventory reported as available rather than a hard number, which also means there is no channel-specific hard-allocation of inventory.

Just as “Availability Allocation” is to the supply-side, “Publishing Allocation” is to the digital commerce channel side. Once you have an idea of the total inventory available (Availability Allocation), you need to tell your sales channels how much inventory you have available to sell (Publishing Allocation) on that channel. For your own website, you might want to “promise” 100% of your available units. If you oversell on your website, the impact is minimal, you have the opportunity to work with the customer and appease them. And you’re not likely to kick yourself off your own website for overselling.

But for Amazon and other marketplaces, you might want to take a more conservative approach. Promising 90% of units to some, different amounts to others.

Many times, sellers will also set a minimum inventory quantity for each channel. If inventory drops below the minimum level, they will publish “0” inventory – which effectively takes the listing down from the channel until inventory can be replenished back to a safe level.

At this point, you might object, noticing that you’ve promised many more units than you actually have to sell.  

Usually this isn’t a problem, it comes back to the order cycle. Most marketplaces provide sales updates every 15 to 30 minutes. So you can adjust the promised inventory as you sell or replenish – always making sure you publish enough to ensure that you can cover sales across all of your channels that might occur in the next hour or so. That’s why we call it “dynamic” inventory publishing. You can change what you publish based on current available inventory in almost-real time to prevent overselling across all of your channels.  

Dynamic inventory publishing increases sales in a couple of other ways beyond just leveraging inventory to sell across multiple channels.

As we’ve seen in past articles and videos, inventory visibility is an important component of yield management. If you know that you have inventory near a shopper than can be delivered in a day or two, you can dynamically publish inventory to guaranteed delivery programs like Amazon Prime or Walmart Two-Day.  

Or you can take you inventory and merchandise it into multi-packs or combine it with other products to form kits or bundles. That increases the number of listings and categories you can sell in, which increases the number of shoppers exposed to the inventory. As we’ve seen, you can use a Master SKU to track how much inventory you have in all our permutations. Then dynamic inventory publishing ensures that you don’t oversell.

This is one of those subjects that is easier to explain visually than just talk about. Watch the accompanying video to this article for a detailed example.

It’s easy to see why dynamic inventory publishing is a core component of distributed commerce: it increases topline sales, improves market through better inventory ROI, and ensure you meet customer – and marketplace – expectations by never overselling.

###

You can learn more about regional inventory management and how it works in the video that accompanies this article: Distributed Logistics for Digital Commerce: Dynamic Inventory Publishing. It’s part five of an eight-part series on Distributed Logistics. To get started with the series, click here to view the first video Distributed Logistics for Ecommerce: A Change in Paradigm and Why it Matters.

See if our D2C Operations Control Tower is right for you.

Get Started