Preventing Lost Sales with Inventory Analytics

Situation

A leading U.S. department store chain operating over 1,000 physical stores alongside a robust e-commerce channel. Their online portfolio includes seasonal fashion products and year-round basics. Despite their reach, the client faced recurring Out-of-Stock (OOS) challenges, negatively impacting sales and customer experience.

Challenge

Frequent OOS scenarios led to:

• Significant lost sales across physical and digital channels.
• Customer churn due to poor availability.
• Operational inefficiencies in tracking and replenishing inventory effectively.

Approach

Mu Sigma delivered a comprehensive, self-service inventory management dashboard powered by the Art of Problem Solving System (AoPSS) framework. Our dashboard provided granular insights into OOS scenarios, enabling precise corrective actions.

Key Steps in the Solution:

1. Mapping the Problem Landscape
   • Leveraged muPDNA™ to break down the OOS issue into interconnected components:
   • Seasonality impacts on demand.
   • Differences in weekday vs. weekend sales patterns.
   • SKU-level demand fluctuations.
2. Insights from Analytics
   • Performed quartile analysis to identify underperforming products.
   • Used heuristic methods to calculate average sales per SKU, enabling optimized inventory reallocation.
3. Dashboards and Decision Support
   • Built a self-service dashboard offering detailed metrics on product hierarchies.
   • Visualized the cascading effects of OOS using the muUniverse™ platform, enhancing cross-functional collaboration.
4. Actionable Recommendations
   • Adjusted inventory levels to match dynamic demand patterns.
   • Minimized customer churn by prioritizing the availability of high-demand products.

Impact

• $90M increase in sales by addressing OOS-driven lost sales.
• Improved customer satisfaction through consistent product availability.
• Enhanced inventory management, reducing OOS occurrences and operational inefficiencies.