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Modern Technology: The Bridge Between Manufacturers and Retailers

One of the biggest problems facing manufacturers and retailers is the gap between market demand and supply. It seems simple enough on the surface: when consumers demand a product, make it and then sell it to them. But, this is actually very difficult to do perfectly. Often, retailers struggle with inventory and demand mismatch, and manufacturers can be caught off-guard by a sudden influx in orders. It creates an uneven business cycle where the highs are punctuated with shortages and lows are created prematurely as consumers lose interest in the product.

The Bridge Between Manufacturers and Retailers

In other words, when business is good, retailers can’t keep up with demand. Profits are cut short because this demand outstrips supply. Then, when a softening of the market does occur, it may either happen prematurely due to market apathy or profits are muted because of the inability of retailers to supply the market with enough goods. Fortunately, advanced POS systems are changing all of that.

Price Optimizations

A cloud based iPad Point Of Sale system isn’t revolutionary. Apple has used this system for years to enhance its user experience it retail stores. But, many other businesses are just now discovering its benefits. One of those benefits is price optimization.

In retail sales, price is usually a leading factor in customer purchase decisions. In other words, people shop on price. This isn’t news, but what is news is that these cloud-based POS systems can be used to optimize both pricing on products and availability.

Prior to this technology, retailers and manufacturers had to guess at what would be popular. Sure, the large corporations in the world could build custom analytics to predict consumer behavior, but not every company can afford Walmart-like tracking systems.

Today, even off-the-shelf solutions are promising enhanced SKU tracking and assortment optimization. So, if customers show preference for a particular product, the sales information can be relayed to a company’s manufacturer in real-time, thus adjusting production output immediately to reflect demand in the retail store.

Obviously, the implications here are huge. Retailers don’t have to wait for quarterlies to understand how they’re doing. They can gain insights into profitability immediately, and make decisions about product availability on the fly.

If a ski supply store notices that a particular set of goggles is selling quickly, it can ramp up production of those goggles, for example. It can decrease production of other goggles that aren’t selling, and it can ensure that the best-selling goggles are always in-stock.

OOS Reductions

The advancements in assortment optimization means that out of stocks (OOS) should decrease in frequency once cloud-based POS systems take over. These systems employ real-time updating so that manufacturers and retailers are in sync with each other about inventory. Why not rely on traditional stocking methods? Because these methods often fail to meet optimal potential due to a lack of real-time updating capabilities. In other words, traditional inventory monitoring isn’t real time. By the time a company notices that it’s out of a particular good, several customers, perhaps several hundred or thousand customers have left the store and purchased from a competitor. That’s bad.

Promotion Planning

How do new POS systems help promotions? Well, they can monitor pricing across the entire industry, not just store-wide. Cloud-based systems can, in effect, perform an advanced type of A-B split testing, allowing retailers to intelligently set pricing from the get-go, and then provide retailers with insights about coupon and discount theory to maximize future, seasonal, revenue.

On-Demand Product Manufacturing

Probably the most exciting innovation being born out of cloud-based POS systems is “on demand” product manufacturing. Imagine a customer walking into a store and requesting a product that the company normally does not stock.

With cloud-based systems, retailers could order that item from another store or from the manufacturer and have the item shipped directly to the consumer. While something similar does exist today, it relies on the manufacturer already having made the product – customization is still somewhat difficult to coordinate. Most of the time, online purchases done in the store by sales associates are nothing more than an ordering protocol that takes existing excess stock from a warehouse and ships it to the store or to the customer.

But, on-demand ordering could reduce inventory overstocking and provide a better customer experience while improving profits for the company by minimizing overruns in production.

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