GCC Retailers shift to outsourcing inventory counting
According to The UK Retail Fraud Survey conducted in 2016, only 20% of retailers who used in-house inventory count resources were satisfied with their outcomes. This same survey found that a dramatic shift towards outsourcing inventory counting with this number increasing from 36% in 2015 to 49% in 2016. The primary drivers for this shift were seen to be the increased need for inventory accuracy and visibility in an increasingly omni-channel world.
The question therefore remains whether we should anticipate a similar shift within the GCC where e-commerce and omni-channel retailing is rapidly evolving?
Historically, in the absence of professional independent inventory counting service providers within the region, retailers have conducted inventory counts overnight using in-house resources that are generally drawn from the sales floor, or from other support functions within the organisation. The impact of this approach is widespread as it results in significant disruption to operations, inaccurate results and wasted time & effort. This is evidenced by the recent GCC Loss Prevention Survey conducted in 2017 which found that 33% of inventory losses resulted from administrative errors and process failures – that mostly occur during the annual inventory count.
Within the context of the GCC, the shift in consumer behaviour and the subsequent growth of e-commerce has been far quicker and deeper than many pundits had predicted over the past 2 years. During the past year we have seen numerous high profile announcements to either partner with existing pure-play e-commerce operators (e.g. Alshaya & Noon.com) or by companies introducing their own offering (e.g. Al Tayer & Ounass / Nisnass). The Middle East already accounts for the 2nd highest volume of cross-border e-commerce transactions and average online orders are 50% higher than the rest of the world. These trends show no signs of abating.
This new frontier requires real-time visibility of inventory with pinpoint accuracy if online purchases are to be fulfilled within the increasingly tight time constraints that are being demanded by customers and promised by retailers.
It is against this backdrop that brick & mortar retailers have been forced to adapt and explore any and every opportunity to lower operational costs, improve internal efficiencies and reduce inventory losses as they seek to protect margins and achieve price parity with pureplay e-commerce retailers. They are also forced to simultaneously build omni-channel capabilities if they intend retaining market share. Consequently, we see most regional retailers embarking on organisational restructuring, reconfiguring their supply chains and investing in technologies such as RFID tagging to enable their omni-channel offerings.
Although RFID has been touted to be the solution to these challenges, it is certainly not the panacea promised in many a sales pitch. This is a technology that is still relatively expensive, is slow to roll out to a portfolio of stores that are geographically spread across numerous countries and, it has limited application to a selected type of merchandise. Using physical resources to conduct the inventory count will therefore continue to be the most feasible method to reconcile inventory in the short to medium-term. The challenge that most retailers now face however, is that they have limited internal resources to perform this function. Furthermore, the recent amendments to labour legislation in the Kingdom of Saudi Arabia present additional challenges as local females are not permitted to work overnight. As such, retailers with a predominant female sales force cannot draw from this pool of resources that they traditionally have.
It is only recently that a company providing an outsourced inventory count solution has emerged to fulfil the requirements of the evolving market. Jard Inventory & Loss Prevention Solutions (established in Dubai in December 2016) is a locally owned, ISO 9001:2015 certified company that has steadily been forging a credible reputation as an innovative and professional outsourced inventory count service provider. Registered as a member of the Mohammed Bin Rashid SME programme, the organisation also specialises in Retail Loss Prevention and works with numerous local retailers in developing sustainable loss prevention programmes. David Erasmus, a founding member of Jard had the following comments when interviewed about the state of the GCC Retail Industry, “When entering the market in 2016, many retailers were reluctant to explore outsourced inventory counting as an option. We spent a lot of time and effort demonstrating the capabilities of our system and processes, and the calibre of our staff who are all drawn from an inventory & process improvement background. We have, however, seen a significant shift in attitudes in the last 8 months where we have conducted more than 150 counts and have counted more than 2 million items for our luxury Retail Clients in the UAE, KSA, Bahrain, Kuwait and Oman”.
As e-commerce continues to gain momentum gulf retailers seem to be realising the increasing need to focus on highly efficient inventory management practices. The opportunity to capitalise on the expertise of independent inventory counting companies seems to offer the perfect solution to both historical and new inventory counting challenges.