Ghita Iraqui
Inventory expert
2020 has been a tough year for many of us. Supply Chain specialists are still struggling to cope up with the COVID-19 pandemic. Most of them try to keep up with global response measures and work diligently to secure raw materials, components and deliver to customers demand. With the Holiday season coming up, things will be a bit more tricky for the supply chain team.
Holiday Season, many people look forward to it all year: decorating the house, cooking enough pudding for the whole week and having a great time with family and friends. But for some people, this time of the year means sleepless nights, headaches and lots of stress, now more than ever.
It’s the most critical time of the year for most retailers for sales, with longer trading hours and markdowns, ensuring that customers’ demand can be satisfied.
Some retailers make up to 50% of their yearly turnover in the run-up to Christmas.
Especially for companies sensitive to Christmas purchases, e.g. perfumery chains or electronics shops, the weeks before Christmas are extremely important. They can put a lot of pressure on its employees and its operations. In inventory management, it can be a struggle to have the right goods, at the right time, at the right place. Not having the item in stock leads to lost sales, while keeping too much inventory lies a risk of obsolescence.
Diving deeper into the retail industry, it may be clear that many companies struggle to smoothly manage their operations during what is supposed to be the most beautiful time of the year. This article aims to help you by providing the four inventory wisdom for Christmas:
The assortment is probably the most crucial decision that needs to be made: which items will be ranged and via what channels. Do you sell all items via all channels, or is there a differentiation between channels and even within each channel? We often see that the online assortment is more extended than the in-store assortment because having centrally stocked goods leads to more flexibility and lower risk. An ABC/XYZ analysis helps to understand what products contribute most to sales based on different criteria such as turnover and order lines. Such a report provides a solid foundation for deciding what assortment strategy will be best for the business.
We all know that price is a marketing instrument, but this should be an educated decision that aligns with company strategy. Do you differentiate per sales channel, do all products in the same range have the same price or do the outer range items get different prices (e.g. deviating colours/sizes)? What about the amount concerning the number of your main competitors? This seeks to guide customers towards making purchase decisions that align with the assortment strategy, for example, having exclusive online pricing to support eCommerce as the main channel. An incremental margin analysis provides insights into the profitability of your assortment.
Especially during Christmas time, promotions can give sales a serious boost. Consumers are ready to spend their money, but shopping should be experiential during this particular time of the year – the winners are those who join the festivities. Promotion does not necessarily translate into a price reduction but could, for instance, also include a free (Christmas) gift. The promotion aims to attract customers and increase sales, and development can be considered successful as long as this has succeeded. Creating a promotion plan upfront will put the organization at ease rather than ad hoc promotional activities. From an inventory management perspective, a promotion plan will enable planners to account for promotions in their forecasting and ordering, allowing them to become proactive and avoid issues with excess or shortage of stock.
As a retailer, you can prepare all the previous steps, but you can’t sell if there is no stock. As always, product availability is key to driving sales. Given that demand peaks at the end of the year, forecasting sales for this period requires extra attention and cannot use average historical sales. Seasonal patterns need to be taken into account, and it is best to do so with accurate data, looking at sales patterns of the same period in the past year(s). Taking this into account, it allows you to calculate a forecast for the end-of-year sales period.
Generally, Christmas shopping begins 4 to 6 weeks before Christmas. It is often essential for businesses to temporarily increase the days of stock cover for this entire period. This means that shelves are slowly filled to a higher level to prepare for the Christmas sales and relieve operations from stress around the Christmas peak. Increasing inventory before or at the beginning of the Christmas sales period is less risky. Still, inventory should be reduced back to normal levels in a timely fashion to avoid ending up with obsolete stock.
Prevent headaches and sleepless nights, make sure that product availability does not ruin the party!
HOW SLIMSTOCK CAN HELP?
Seasonal fluctuations in demand happen daily and can occur due to a variety of reasons. One of these reasons could be weather influences. By showing historical weather information in Slim4, users can receive an indication of why demand was behaving in a certain way (unexpected increased or decreased in demand) and whether specific demand based on weather influences should be included or excluded in demand planning. Weather information that can be useful for demand planning is the following:
Within Slim4, the above information is shown per day. The weather information differs per region and location, so each of the values is shown on the location of the selected item (based on the latitude and longitude of the selected warehouse).
Prevent headaches and sleepless nights, make sure that product availability does not ruin the party!
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Ghita Iraqui
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