Many industries have decided to pause the planned new product and line extension launches. This pushes companies to figure out a more innovative approach to product introduction, post-COVID-19 emergence.
The big question is, how do we get the product to the shelf when it’s difficult to determine the demand pattern in the post-COVID-19 world.
Let’s remember: Product innovation is indispensable in the times of “new normal.”
HOW CAN YOU ESTIMATE DEMAND IN ADVANCE OF A NEW PRODUCT INTRODUCTION?
Launching a new product is an exciting time for any business. However, working out how exactly how much demand to expect can be a real challenge. And it’s even more challenging now than ever. On the one hand, if the new product introduction is a roaring success, you want to ensure you have enough stock to exploit the sales opportunity fully. Equally, if you overestimate demand, this could easily result in a massive amount of excess. Consequently, it’s vital that when anticipating demand, you remain realistic and keep in mind the current scenario!
IS THERE SUFFICIENT MARGIN TO JUSTIFY A NEW PRODUCT INTRODUCTION?
Even if there is plenty of interest in your new product concept, there is little point in pursuing a new product introduction if it will never achieve a sufficient return on investment. As a result, you must do your homework before making any final decisions. Through confirming costs, order volumes and lead times with suppliers, it will quickly become evident whether it’s worth taking the risk. And do the groundwork more thoroughly since the current situation might be the “new normal” for a while.
If your product offers an ample return, then that is a positive indication to proceed with introducing a new product. However, if the margins are not enough, perhaps the supplier is willing to negotiate on prices. Alternatively, maybe you can work with your customers to increase the sales volume.
PREVENTION OF INVENTORY OBSOLESCENCE
To improve the prevention of inventory obsolescence, it is essential to consider factors that are unknown or not associated with the problem, like the COVID crisis. For example, more than 25% of obsolescence comes from poor management when introducing new articles.
Regardless of the management that can be done to avoid increasing the current obsolescence, establishing a mechanism for evaluation of releases is a good option for the prevention of inventory obsolescence. Considering the obsolescence generated can be an additional impulse so that the projections of the new articles are from the beginning as realistic as possible.
Now, it must be assumed that risk is being taken whenever a new article is introduced. If the company aims to innovate its materials, this decision responds to a characteristic of the way of doing business and, therefore, innovation translates into risk, now more than ever.
DYNAMICS OF ASSORTMENT
It is well known that the lineup of companies is usually dynamic. While some elements are removed from the active assortment, others enter it. Making a correct phase in and phase out becomes vital when it comes to avoiding inventory obsolescence. Estimates of new products may only be a statement of intent, and plans will not necessarily be met. If all the intervening parties of the company work together, it will be easier to evaluate the results obtained. In this way, generate learning curves that are the engine of improvement in inventory obsolescence prevention when managing the introduction of new items.
Anyway, this does not mean that you cannot effectively make proactive management in the prevention of inventory obsolescence. If you have the right systems to obtain visibility regarding the status of the inventory and its complemented with functional performance analysis, from the sale of new items, alarms can be triggered that allow reacting as soon as possible to a probable risk of obsolescence and, at the same time, prevent the problem from growing and growing …
We will be seeing uncertainty in the coming months, on what, and when customers want what. But let’s remember, now during these times customers are looking for safety, and transparency from brands, companies and retailers.