Question

Online shoppers have high expectations. Shoppers expect more from online shopping than easy-to-use websites. Successful online retailers are creating online shopping experiences that encourage repeat customers and reward shopper loyalty. In 2013, UPS (United Parcel Service, Inc., Sandy Springs, GA) conducted a series of studies to gain insight about the shopping behavior of customers. The studies found that customers want to be able to shop anywhere at any time, and they want other services such as the flexibility to choose delivery dates and locations. There are several trends that affect shoppers’ delivery expectations:

1. Omnichannel Fulfillment - Shoppers want an integrated buying experience across a firm’s multiple buying channels (its stores, website, and third-party retailers). According to the UPS study, 44% of online shoppers want the option to buy online and pick up the items at their local store. Another 62% said they wanted the ability to make purchases online and make in-store returns. The study also found that of the shoppers who use the ship-to-store option, 38% of them purchased other items while in the store.

2. Delivery Time Frames - Slow or delayed deliveries are one of the main reasons consumers do not shop online. Nearly half of online shoppers abandon their online carts before checking out when they find that the products they selected have long shipping times. Furthermore, very few potential customers are willing to pay higher prices for same-day delivery. On the other hand, when customers know how long it will take for their products to arrive, they are surprisingly patient with the retailer (for free shipping, they are willing to wait as long as 7 days for delivery).

3. Customized Delivery - Ninety-seven percent of shoppers want order tracking services available so they can instantly determine the status of their order. Whether through e-mail alerts or by accessing the retailer’s website, customers demand updated information on the shipping and delivery dates for their orders

4. Easy Return Policies - The number of people returning or exchanging orders has grown nearly every year since online shopping became commonplace. Customers expect that returning orders will be “painless” and easily accommodated by online retailers. It also pays off in terms of future sales, with 67% of consumers saying they will shop more often with a retailer if they offer a hassle-free returns policy.

Many of the expectations that online shoppers bring to the retail experience have implications for inventory management, suggesting that firms with fully integrated information and inventory control systems will be better prepared to compete for the growing ranks of online shoppers. Between the steps of integrating upstream inventory, avoiding stock-outs, dealing with the expectations of immediate delivery, and ease of use, today’s online systems are critical sources of inventory management. Indeed, the organizations that are best at fully integrating with inventory systems will be best able to compete effectively for online shoppers’ business.

A. Think of some aspects of inventory management discussed in this chapter (for example, inventory costs or cycle-stock patterns). How does online shopping affect them?

B. How is omnichannel shopping changing the way inventory is managed? How will modern inventory management systems make omnichannel selling easier?

C. Suppose you are working for a local drugstore developing an online shopping site. Think of some products you routinely sell, and apply the ABC classification system to them. How would the ABC classification help you in planning for online sales?

Answer 1

Think of some aspects of inventory management discussed in this chapter. How does online shopping affect them?

1. Demand forecasting for a particular product is difficult.
2. Most of the inventory control techniques such as VED, FSN and Just in Time cannot be applied effectively as the demand value is highly elastic.
3. Dynamism in product selection due to a wide variety of alternative products available online.
4. Investment on inventory management system is required rather than inventory stocks.
5. Inventory cost is less but, in traditional shopping customer bargaining is high, while in online shopping the selling company has to make supplier barging to project their product at less price.
6. EOQ [Economic order quantity] cannot be much applied here in online shopping.

How is online channel shopping changing the way inventory is managed? How will the modern management system make online selling easier?

1. In Online channel shopping the website is an intermediary connecting supplier and customer, hereby stocking at Gurdon or inventory cost is practically zero.
2. For online selling, investment is required website development, inventory management system and server maintenance which hardly cost few dollars, while traditionally selling requires physical infrastructure, salesperson, sufficient inventory and Mangers which requires heavy investment.
3. Further online shopping cover customers globally, while traditional shops only cover local area customers. Meaning, online shopping is capable of covering more customers at very less investment.
4. Online shopping a few employees for the overall maintenance of website and inventory management system. While traditional shopping requires a significant amount of employees to maintain and manage inventory and consumes considerable space, energy and time.

Suppose you are working for a local drugstore developing an online shopping site. Think of some products you routinely sell and apply the ABC classification system to them. How would the ABC classification help you in Planning for online sales?

Note

The ABC inventory technique gives priority to products that have acquired more value during annual sales.

• A-items are goods which annual consumption value is the highest.
• B-items are the interclass items, with a medium consumption value.
• C-items are, on the contrary, items with the lowest consumption value.

Items considered:

1. Biotin Tablets
2. Fish Liver oil pills
3. Sleeping pills

Expenditures	Items	%	Cost / Spend	%	Classification
Biotin Tablets	30	10	24000	80	A
Fish Liver oil pills	60	20	4500	15	B
Sleeping pills	210	80	1500	5	C
Total	300		30000

A-items [Biotin Tablets] are goods which annual consumption value is the highest. The top 80% of the annual consumption value of the drugstore typically accounts for only 10% of the total inventory items.

B-items [Fish Liver oil pills] are the interclass items, with a medium consumption value. That 15 % of annual consumption value typically accounts for 20% of total inventory items.

C-items [Sleeping Pills] are, on the contrary, items with the lowest consumption value. The lower 5% of the annual consumption value typically accounts for 80% of total inventory items.