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When it comes to running an optimised seasonal retail business, the allocation of inventory is a critical task that can either boost stock turn and profit or hamper sales and create volumes of dead stock. As a result one of the most debated topics in fashion inventory management is the trade-off between allocating size packs versus individual SKUs (Stock Keeping Units) from the warehouse to stores.

Size Packs: The Efficiency Game

Many retailers opt for size packs due to the efficiency they bring to the supply chain and warehouse operations. Size packs, which contain a pre-set assortment of sizes for a particular product, simplify the process of receiving and allocating inventory.

Why do retailers use size packs? :

  1. Speed and Efficiency: Handling size packs is faster compared to individual SKUs. Warehouses can process and distribute these packs more quickly, reducing labour costs and speeding up the supply chain.
  2. Simplified Processes: With fewer individual units to handle, the complexity of inventory fulfilment decreases. This can result in fewer errors during the allocation process and more streamlined operations. A good example is in footwear retailers where the logistics of managing a wide size range and bulky boxes means size packs win.
  3. Cost-Effective: By reducing handling and processing time, retailers can save on operational costs, which is crucial for maintaining competitive pricing.

The Accuracy Dilemma

However, the convenience of size packs can come at a cost. While they enhance efficiency, they always compromise the accuracy of inventory allocation. This trade-off can lead to several issues:

  1. Mismatch of Demand: Size packs are based on averages and assumptions about size distribution. In reality, the demand for specific sizes varies widely across different stores and regions. As a result, some stores may receive too much of one size and too little of another, leading to both overstock and stockouts.
  1. Deadstock and Missed Sales: Incorrect size allocation can result in deadstock – items that remain unsold and take up valuable space. Conversely, popular sizes that run out of stock quickly lead to missed sales opportunities and disappointed customers.
  2. Customer Satisfaction: Inaccurate size availability can frustrate customers, driving them to competitors. In an age where consumer expectations are higher than ever, ensuring the right product is available at the right time is crucial for brand loyalty.

Striking the Right Balance

The challenge for retailers is to find a balance between the efficiency of size packs and the accuracy of individual SKU allocation. Here are a few strategies to consider:

  1. Data-Driven Decisions: Leveraging analytics can help predict size demand more accurately, allowing for smarter, more targeted allocations, whether it’s packs or solids. By forecasting the sales patterns and customer preferences at each store, retailers can tailor all their allocations more precisely.
  2. Hybrid Approach: Some retailers are adopting a hybrid approach, where they use size packs for initial allocations but rely on individual SKU replenishments to address specific size needs. This can combine the best of both worlds – efficiency and accuracy.
  3. Smarter size packs: Improving the on size pack configuration can be a good place to start. By using retail science to generate the ideal pack configurations such as small bias and large bias packs, retailers can improve the accuracy of their size pack allocations.
  4. Feedback Loops: Establishing strong feedback mechanisms from stores can help warehouses adjust allocations in real-time. Continuous communication between store managers and inventory planners can bridge the gap between supply and demand.

The debate between size packs and individual SKUs highlights a fundamental challenge in fashion retail: balancing operational efficiency with customer

satisfaction. However, the trade-off doesn’t need to be so costly. By embracing data-driven strategies and innovative technologies, retailers can navigate this balance more effectively, running the optimal mix of the two that fits their unique business requirements. In today’s competitive market, those who master this will stand out and thrive.

What are your thoughts on size packs versus individual SKUs? Have you found a successful strategy that works for your business?