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Should you allocate stocks to every sales channel?
Many companies now-a-days sell through multiple channels. The most common is Offline channel, catering to physical stores. They also sell to eCom companies either as a B2B channel or sell their products directly on these companies’ website (B2C). Some companies also have their website to sell directly to consumers (D2C).
The servicing locations for these 4 channels are often shared. These locations carry inventory buffers to meet the demand across all the channels. The question is… should we reserve stocks at these service locations channel wise?
Many companies do reserve stocks channel wise. The underlying assumption is to ensure that no channel consumes more stocks than its fair share, lest other channels should experience a stockout.
If we look deeper, this assumption is flawed as the allocation is done as per the channel forecast, which is error-prone. It is quite possible that the demand in one channel is far lower than its forecast whereas other channels witness a surge in demand.
The policy of channel wise stock allocation goes against the principle of ‘Pool and Pull’ in TOC, which suggests aggregating stocks at various invoicing locations and making it available to all the channels basis their emerging demand patterns.
A simple change in such a restrictive policy does wonders in improving product availability as well as product freshness.