What is Inventory Allocation?
Inventory allocation is the process of assigning specific products, in specific quantities to be delivered to store locations, where they will be displayed and sold.
Inventory allocation is typically done by the merchandiser or the inventory controller, and is uploaded on the retail merchandising system to be seen and actioned by the warehouse team.
When Does Inventory Allocation Happen?
The allocation process can take place at any point throughout the year, and is not necessarily restricted to new shipments received from suppliers. There are different scenarios where inventory allocation is needed:
1. Initial Allocation
When an order or a shipment is received from the supplier an initial allocation needs to take place, in order to specify which store will get which products and in what quantities.
After the initial allocation has been done and sent to stores, the replenishment process comes into play, where pieces that are sold will get restocked based on the replenishment rules set by the merchandiser.
2. Manual Allocation
Throughout the year, there will be times when manual allocation will be needed to fulfill trading needs.
This usually happens during high peak trading days and during sale times. During those times the selling of the items is accelerated and so additional quantities are allocated to the stores to support this higher speed of sale and to avoid out-of-stock situation.
Importance of Inventory Allocation
Like most of the aspects of inventory management, allocation is important in ensuring the stores have the right stock, at the right place, in the right quantities, at the right time.
After all, the display area at the stores will always be less than the total merchandise the business is carrying. So making sure that each store is getting the right amount that is suitable for display and based on the sales levels of that particular store will ensure best merchandise flow practices.
When stock is allocated properly, there will be less need for moving back & forth between stores and warehouse and also between stores. This saves a lot of time and resources that are wasted in deliveries and transfers.
Also when stores have the right amount of stock, there will be less missing sales opportunities and a better customer experience overall.