Basing inventory plans on national averages for apparel sizes leads to warehouse inefficiencies

When it comes to inventory planning, retailers face special challenges. It's hard for them to predict what consumers will want to buy and when. In the case of apparel, many retailers make inventory decisions based in part on national averages for apparel sizing. But that approach can lead to significant miscalculations in inventory production as well as warehouse operational inefficiencies, according to Brandon Levey, CEO of Stitch Labs, a provider of multichannel inventory management and control software for small and medium-sized businesses.

Apparel sizing can vary significantly depending on local and regional markets. To find out just how much variation there is, Stitch Labs analyzed apparel sales from tens of thousands of retailers across the United States. Among the findings:

• Consumers in Western states purchase almost double the percentage of extra-small (XS) apparel compared with the rest of the country.
• Consumers in South Dakota, Nebraska, and Iowa purchase the highest percentage of extra-large (XL) and 2XL apparel.
• Texas consumers buy five times as much XL apparel as XS sizes.
• Connecticut's sizing breakdown most closely resembles the U.S. average.

How might such geographic variations affect warehouses and distribution centers? Retailers that rely on national size averages risk allocating inventory to warehouses in regions where those sizes are less likely to sell. As a result, Levey said in an interview, "you anticipated selling, say, 25,000 of an item, but because the size breakdowns were incorrect, you have 5,000 left on the books at the end of the year. So now you have inventory you can't move taking up space you need for something else." Furthermore, he added, you'll have to pay for the labor to handle those leftover boxes again.

There are other, costly consequences of making inventory decisions based on average sizes. Apparel sizing affects case size and weight, so stocking the wrong size mix can lead to inefficient slotting, palletizing, and truck loading. Retailers could also end up making more merchandise transfers among warehouses in different regions.