Optimize Open-to-Buy Processes with Order Acknowledgment

by | May 13, 2020 | Order Management, Retailers

Once a buyer places an order with a supplier, they are often left in the dark about if and when the order will arrive or what will be on the delivery. The lack of a confirmation and/or order acknowledgment leaves buyers asking questions like: Can the vendor ship the quantities I need? Will the order arrive on-time? Are any items back ordered? Should I increase my order in case replenishing takes longer? Should I place another order to reserve future quantities? This can also be frustrating since buyers have limited open-to-buy dollars and want to maximize them. Unknown delays or order cancellations only tie up funds that could drive more category sales.

Buying organizations without trusted order status information are at a disadvantage. Fixing this problem is possible with order acknowledgments and purchase order automation that empower buying organizations to:

  • Know what orders can be filled and if they will be on-time
  • Reallocate open-to-buy dollars from unconfirmed orders
  • Reallocate Store quantities
  • Have advance visibility of product substitutions
  • Have visibility into pricing discrepancies
  • Reduction or reassigning staffing expenses
  • Cut excess inventory without incurring stock-outs

Know the status of every order

Problems begin with the lack of insight into orders. However, these issues can be prevented when suppliers respond to an order with an order acknowledgement. Then the buying organization knows the supplier received the order and if the supplier will have any problems fulfilling it, well before the supplier ships the order. Addressing this single issue with better data has positive impacts throughout the buying organization.

Unshackle unused open-to-buy budgets

Without order acknowledgments, buyers often resort to calling and emailing suppliers to get order information and updates. Otherwise, they are guessing about how much of their open-to-buy budget remains. In one instance, a leading shoe retailer automated this process and discovered that they had $10 million annually in unused open-to-buy budgets due to unacknowledged orders.

Reallocate Store quantities

For many buying organizations they rely on expected delivery quantities to determine the mix of the quantities they plan on shipping to the Stores once the shipment arrives at the Warehouse/Distribution Center. Having Order quantities in advance of the shipment or ASN arriving will allow timely re-allocation but also ensure that the correct quantities are going to be available to the store

Have advance visibility of product substitutions

For those buyers that allow products to be substituted, having advance visibility of what the substitutions will be will allow advance notice and quicker shifting of products.

Have visibility into pricing discrepancies

Ensuring margins are being maintained by product and that customer pricing is reasonable in the market are key KPI’s for buyers. The timely reconciliation of product cost with their trading partners will ensure that products will sell and profits held.

Reduction or reassigning staffing expenses

Many buying organizations employ staff to contact trading partners and manage order updates. This process is costly, time-consuming and prone to errors. And, it won’t easily scale with your business. Purchase order automation greatly diminishes this need by providing this same data electronically, all while cutting costs.

Cut safety stock

Ordering and holding excess inventory, or safety stock, is common in retail to prevent out-of-stocks. But, carrying inventory is expensive. With electronic order status updates, buying organizations know which items they’ll receive, and when. This new confidence in order fulfillment empowers these businesses to trim safety stock without the risk of stock-outs.

Excess inventory is the costliest result of poor order acknowledgment data. And, the savings from reducing inventory levels are substantial. For example, a billion-dollar outdoor retailer struggled with poor fill rates and late shipments from trading partners. They overcompensated by ordering more inventory than needed to avoid empty shelves. With purchase order automation, they saw the potential to reduce inventory by over $50 million annually.

Are you ready to optimize your open-to-buy dollars and find new savings from better data on your orders? Read more about these improved processes in our new Order Management Playbook or contact us today for a personalized consultation with our retail experts.

Scott Bolduc