Challenges of Real-time Inventory Management and its Implementation in B2C and B2B eCommerce
Is real-time inventory critical for successful B2C/B2B ecommerce and offline sales? You can mention UX and page loading speed as the most often cited factors of increasing the conversion rate in ecommerce. Much less frequently discussed is that real-time inventory is the third most important factor for conversion growth in B2C and highly likely the first in B2B.
After making a purchase decision, every B2C & B2B buyer wants to be sure that the purchased or ordered product is in stock at the supplier. Otherwise, if the supplier rejects the order at the time of fulfillment and delivery, the buyer will have a disappointing experience. Moreover, the buyer will lose time, which in B2B may jeopardize the buyer's production plans.
Up-to-date inventory data are especially important in fields such as mechanical engineering, construction and healthcare. If a customer buys many items online for their production facility or supply chain, they must be sure that all the ordered SKUs are in stock.
For example, even the absence of small components can delay the manufacturing of a large and complex machine. More serious consequences could be associated with supply disruptions in healthcare and aviation leading to financial losses and having a serious impact on people’s lives.
The other side of real-time inventory is that reliable information about the availability of desired products at the supplier's warehouses has a positive effect on sales. The simple explanation is that customers can only buy what is available, but brand loyalty plays a significant role in a long-time partnership. In B2B, it is imperative to have a reliable supplier, and real-time inventory is one of the key factors by which customers evaluate your company to do [or not] a successful mutually beneficial business with you.
Traditional models of inventory management
The problem of having an accurate inventory exists since people are doing business, i.e. it has a millennium-long history. With the advent of client-server applications for inventory management in the 1990s, the solution to the problem came a lot closer. However, such applications require replication between servers if the business owns multiple sales points and warehouses.
The drawback of the client-server model was in the irrelevance of inventory data between replications of the inventory management servers. Data replication is often carried out at night, and salespeople know the actual stock of products at the beginning of the trading day. But during the day, to find out the availability of stock, they have to clarify this by calling the warehouse or the nearby points of sales [if points of sale have their own mini-stocks].
Client-server Model diagram
A modern real-time inventory system appeared in the 2010s with virtual desktop (VDI) and desktops-as-a-service (DaaS) technology. Salespersons work with a copy of the screen of the inventory management system, which physically runs on the remote server. This server is a single point of data management, so the actual inventory is available to all salespersons at any point of sales.
For example, in Russia, IKEA stores work with a single Microsoft Dynamics database, which automatically generates consolidated reports on corporate sales, in the context of a store, a city and the company as a whole. Users run remote desktops and log into the system using a Citrix application server.
Virtual Desktop Model diagram
Despite all the elegance of displaying real-time inventory data using remote desktop technology, this architecture has drawbacks when working for ecommerce. The problem is fundamental because VDI is designed to access a server by a limited number of trusted users who are employees of the seller's company.
For B2B ecommerce, it is poorly suited, since it requires access rights for third party users (client employees) to the seller's back office. The risks of vulnerabilities and data theft are higher here than a possible sales revenue.
Real-time inventory management with real-time ecommerce
With the advent of composable headless ecommerce systems, a new technology has emerged, where inventory data is placed in an intermediate real-time module between the back end and touchpoints. Such a module stores all sales transactions and simultaneously pulls up data from the back end (ERP system).
As an example of using the real-time inventory module, consider this case of a prominent bookseller. The company usually has a chain of dozens or hundreds of retail outlets, B2C ecommerce and sometimes B2B commerce for the supply of books to educational institutions. Such a bookseller probably has the traditional client-server architecture of the inventory.
Each store could only sell those books that were in the local database of the store. If the required book were not available, the shop would still try to help by asking the customer to leave contact information, and they would inform about the arrival of the book. Then the seller contacted the ERP admin, who would find the necessary book in the main database and filled out the task for the delivery of the book to the customer’s nearby store from the central warehouse or to another store.
Bookseller generalized inventory diagram
Such a procedure for the buyer looked client-oriented, but in fact, it slowed down business. If the buyer needed the book urgently, she/he did not wait for the delivery procedures and purchased from a competitive bookseller.
Ordering through the online store did not guarantee that the book would be delivered on time either, due to unpredictable search results of the book over local stores databases and/or the central ERP system. Sometimes a book offered for purchase online, was already out of stock. The customer then received an apologetic message, but of course, remained disappointed with this customer experience.
For real-time inventory, with the implementation of Virto Commerce to the bookseller’s IT architecture, the company can get a real-time layer, to which they have entered the entire product catalog, all client accounts, an inventory system and almost all orders. So Virto Commerce has become a single point of real-time inventory management in which every salesperson works.
Bookseller’s generalized modular real-time inventory diagram
All transactions that now pass through the touchpoints, then go through the Front end/Experience APIs to the inventory module. The result is that stock balances can be calculated correctly, and online sales are confirmed by the availability of products. The customer is assured of the book’s availability and can see the stores where the book can be found. They then choose to go directly to the shop or have it delivered to their home or office.
For offline stores, sales have become much more convenient as the store staff knows the availability of books in all retail outlets / central warehouse. If there is no book in this store, they can promptly arrange to deliver a book or other product to the customer's home or outlet.
The case study above comes from Standaard Boekhandel, a large Belgian bookstore chain of approximately 150 stores. As a result of the real-time inventory implementation based on the Virto Commerce modular architecture, the bookseller recorded a growth in sales of up to 20%, which was a good confirmation of their business strategy for the development of offline and ecommerce.
For more information about the Virto Commerce real-time inventory module, please visit the inventory webpage of the platform documentation.
Contact our experts to learn more or reserve a demo of Virto Commerce B2B ecommerce platform.