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promotions management

Demand forecasting: How to remove the pain from promotions

Demand forecasting | With the promise of increased footfall and boosted sales, it is easy to see why organizations have become so dependent on promotions. However, “special buys,” “buy one get one free,” and even “price match” promotions all place significant strain on supply chain teams.

To add further complexity, if demand forecasting is not managed carefully, it can have huge implications on the bottom line. So what steps can you take to achieve a truly painless promotion?

1. You can never plan too early!

Promotions take many different forms. However, even the simplest promotion requires careful planning. After all, unless the right stock is available in the right location at the right time, the promotion will be a waste of time.

In order to maximize the profit opportunity and minimize the risk of waste at the end of the promotion, the planning process must kick off well in advance. With the additional complexity created by fresh products’ short product shelf lives, timing really is everything!

2. Surplus stock will lead to sloppy results

With all the excitement leading up to a promotion, it is easy to get carried away. However, given that the vast majority of excess waste comes from over-ordering in the first place, you must rationally anticipate the promotional uplift in demand. Unless the potential increase in demand forecasting is investigated effectively, we risk eroding the value of promotional activity as surplus stock causes unnecessary waste.

3. Replenishment is a double-edged sword!

One of the biggest challenges of today’s trend of extended promotional periods is making sure the shelves remain stocked throughout the event. Even if an item sells phenomenally well, if the product sells out on the first day of the promotion, this will be a wasted opportunity unless the items can be replenished quickly and efficiently. On the other hand, if the stock is replenished too close to the end of the promotion, this too can result in excess and waste. As a result, replenishment must be timely and well-aligned with the allocation strategy.

4.Don’t forget your exit strategy

When it comes to promotions, the proof is in the pudding! Regardless of how successful the promotion was, if the stock left towards the end of the promotion is not well controlled, this can result in missed sales opportunities and even waste. Consequently, you must ask yourselves: How can we squeeze the most value out of the stock we have left?

5. Keep clean and prosper

At the end of a promotion, most retailers are too worried about the next big event to think about the original promotion’s impact on sales. However, given that this historical sales data will be used to build future forecasts, organizations cannot afford to drop the ball when it comes to data quality.

In order to ensure that their supply chain data is trustworthy, steps to isolate promotional sales data from normal demand data. By keeping demand forecasting history, “clean” supply chain teams can confidently anticipate future demand forecasting!

Clear as much stock as possible before the end of the promotion. Although this will often mean pushing the remaining stock to the locations with the highest sales volumes, taking steps to minimize the amount of promotional stock that has to be marked down will help maximize margins.

Don’t pay the price for poor promotions management!

There is no escaping that promotions will always cause headaches for retailers. However, by following these steps, organizations can better prepare themselves to avoid the pitfalls of poor promotions management to ensure success!

Download our checklist for demand forecasting and promotions management!