To: Executive Leadership Team
From: David Chen, Chief Financial Officer
Re: Board approval of $1.1M capital allocation for AI-assisted inventory optimisation
At its meeting on 11 February 2026, the Board approved funding of $1.1 million for the Inventory Optimisation Initiative, the largest of the four AI programs in our FY26 technology portfolio. This memo confirms the mandate, expected outcomes, and governance arrangements.
Why we are doing this
Inventory is our single largest balance-sheet item and a persistent source of margin leakage. Across our 50 stores and online channel we currently carry an estimated $1.4M in annual lost sales from stockouts and roughly $2.6M in markdowns on overstock. The objective is to deploy demand forecasting and automated replenishment to cut both (simultaneously reducing stockouts and overstock) while freeing store managers from manual reordering.
Target outcomes (24-month horizon)
| Metric | Baseline (FY25) | Target |
|---|---|---|
| Stockout rate (core lines) | 11.2% | ≤ 6% |
| Aged stock > 90 days | 18% of units | ≤ 11% |
| End-of-season markdown spend | $2.6M | ≤ $1.7M |
| Store manager hours on reordering | ~6 hrs/wk each | ≤ 2 hrs/wk |
Budget
- Forecasting & replenishment platform / licensing: $420K
- Systems integration & data engineering: $390K
- Internal team & backfill: $190K
- Contingency (10%): $100K
Governance
Dr. Priya Sharma (Head of Data & Analytics) is accountable for delivery, with Marcus Kim (CIO) owning systems integration and Sarah Thompson (COO) representing store operations. Monthly progress reports to the ELT; quarterly to the Board.
Please direct questions to my office or to Priya's team.
David Chen, Chief Financial Officer