This blog post is a part of our blog series on the use cases of SAP S/4HANA, designed to offer a closer look at the value behind a digital core powered by SAP S/4HANA for Fashion. Click here to read the previous post on The Role of SAP S/4HANA For Fashion and Vertical Business in Order Fulfillment.
Welcome back to our use case series on SAP S/4HANA Fashion. This time, we will be looking at selected use cases on Inventory Management with SAP S/4HANA Fashion and how the solution enables fashion brands to manage stocks more profitably with greater visibility into real-time inventory across wholesale and retail.
01. Stock Protection via Product Allocation on Advanced ATP
Fashion companies and vertical businesses often sell through a multitude of channels. However, not all the orders are placed at the same time. Important customers may place orders late, therefore it is important to protect stock for them. The S/4HANA 1709 Fashion and Vertical Business solution offers a powerful and integrated stock protection mechanism to ensure that fashion companies do not run the risk of losing their most valuable customers.
Stock Protection on SAP S/4HANA for Fashion works by prioritizing demand plans during the sales cycle. Unpredictable problems, such as increased demand, can lead to critical situations in order processing, which ideally should be prevented before they arise. In such cases, fashion companies must prioritize customers, channels, or markets, to ensure that the most important customers are served first. Stock protection helps companies achieve this goal by protecting inventory for high priority demand even if important sales orders are received late and low priority orders precede them.
For e.g. a fashion company has multiple sales channels: Retail, e-commerce, and Wholesale. e-commerce is set as priority 1, Retail as priority 2, and Wholesale as priority 3 as below:
In this example, if e-commerce does not have sufficient stocks, it can consume 300 units from wholesale and 200 units from retail to ensure demand from profitable channels are always met. Referred to as Horizontal Stock Protection, this protects channels from cannibalizing each other in order to keep the possibility of balancing stock for a more profitable outcome.
Fashion retailers can also use the same functionality to ensure stock protection for a channel or channel+customer combination, with business rules in place to ensure other channels cannot consume or poach its stock. This method, referred to as vertical stock protection protects stock for high priority channels, and is useful if you want to ensure the success of a critical sales channel, even if less important ones are repressed.
02. Demand and Supply Segmentation
Fashion companies today face intense competition in an increasingly customer-centric global market. Therefore, it becomes important to streamline internal processes and logistics around the unique requirements of each market through appropriate sourcing, planning, and supply of goods.
To help fashion brands manage demand and supply better, Demand and Supply Segmentation on SAP S/4HANA Fashion is designed to categorize stock logically, based on specific criteria.
Using segmentation on SAP S/4HANA for Fashion, you can order materials of different quality levels, for different customer channels, and from different countries of origin.
This way, you can easily manage supply with greater visibility into stock, separated by channels.
Some of the key benefits include:
- Easily meet the unique requirements that are specific to the fashion industry
- Implement rules to segment stock with predefined logical characteristics such as retail or wholesale sales channels or physical characteristics such as quality grade or country of origin.
- Leverage these characteristics during other processes such as order promising, order allocation and other related processes.
Store fulfillment refers to a retailer’s ability to fulfill e-commerce orders in brick-and-mortar store locations. Services like ship from store and buy online pick up in store are powerful value adds for fashion retailers. Major labels have already begun setting up their stores as fulfillment centers and by adopting ship-from-store, have propelled the delivery mechanism and are reaping larger margins on stock that sit idle in stores.
With SAP Customer Activity Repository on SAP S/4HANA Fashion, business rules make sure orders are executed according to the priorities set by the retailer. In the case of click and collect on SAP S/4HANA for Fashion, fashion companies can extend real-time inventory availability to customers. For instance, customers checking a fashion retailer’s website can determine the store availability online and opt for "click and collect" service by choosing their preferred store.
Check out our previous article an in-depth look at the role of SAP S/4HANA Fashion in Order Fulfillment Across Channels – Store and e-Commerce.
04. Endless Aisle: Fulfilling Out of Stock Products
Historically, if a customer placed an order for a product not in stock, the order would be cancelled or placed on hold until the item was restocked. However, when SAP S/4HANA Fashion is connected to your POS and e-commerce system, if an order for an out of stock product is placed, then inventory visibility allows to still fulfill that order from another location where the item is in stock, including inventory held in other channels.
This functionality can be utilized across all sales channel. In doing so, fashion retailers can maintain adequate in-stock quantities while eliminating duplicate safety stock, which legacy systems held separately in each inventory pool that often resulted in excess safety stock. For example, a customer in a brick-and-mortar store wishes to purchase a pair of boots but the store doesn’t have her size. Then via an in-store kiosk or POS, the sales associate is able to fulfill the demand with the right size in stock by routing the order to be fulfilled from the warehouse or a nearby store.
Meeting Tomorrow’s Demand with SAP S/4HANA for Fashion
The selected use cases above related to SAP S/4HANA Release 1709 are designed to depict and visualize the value of S/4HANA Fashion ERP solution, and its possibilities when connected to a fashion company's extended IT ecosystem - including POS, e-commerce and CRM. Our blog series will continue to concentrate on several use cases including Advanced ATP, Back Order Processing and Stock Protection.