Retail demand planning is a very difficult activity in the current tumultuous marketplace because of the velocity of change in consumer demand and the length of the extended supply chain. Forecasting and inventory planning takes on new importance in this marketplace to support the velocity of change. Consumers have used the social networks along with the omni-channel tools and capabilities to take control of their shopping and purchasing to support their changing lifestyles. The key point to successful demand planning is understanding the consumer lifestyle demands and this requires a very flexible and also robust forecasting and inventory planning and management practices in order to react to the velocity of changing consumer demands. This supply planning must be a focus of the retailers now in order to support the changing marketplace and survive.
For a long time the retail supply chain was developed and focused on cost containment and this, in turn, drove a focus on obtaining the most advantageous price in order to support the low cost strategy and maintain a level of profit. This focus on price required purchasing large amounts for the entire season in order to command a low price to support their strategy to create consumer interest, traffic in the stores and sales based on low prices. This focus on the season demanded a long range forecast horizon that in itself created a level of risk in the forecast and the supply demand. This in turn creates a risk for a higher level of overstock inventory that must be addressed through price reductions. This created a downward spiral that taught many consumers to delay purchases until the end of the season when they know the product pricing would be dramatically reduced to make room for the next season product.
This is a negative cycle that drives additional costs in the retail demand supply chain that overshadows the original low cost purchase thereby negating the low price strategy. These new cost pressures drive a requirement to improve the demand planning and forecasting to address the overstock risk. This new pressure on demand planning requires a shorter planning horizon in very large part due to the velocity of change driven by consumers and the social commerce marketplace. This shortening of the demand forecast time period allows the forecast to be more accurate, however this shortened time period requires a shift in the supply chain to reduce the buy quantity and then find new and near shore supply chain partners that can complete quick turnaround purchases. Another option to the shortened supply cycle would be air shipments of smaller quantities.
Social supply chain planning needs to change dramatically as a result of the changing retail marketplace. These changes though are dependent on retailers changing their practices and more importantly their supply chain to support the shortened cycle and flow. These changes will increase inventory efficiency and which in turn should recoup some of the additional costs related to supporting the changing supply chain demands. The good news is that technology improvements can support these changing demands more efficiently than ever, the bad new is that it will require retailers to spend on the new technologies.
And now for the audience participation portion of the show…
ECommerce will have wide ranging impacts on both the retail and manufacturing sectors. How can you focus these abilities to improve the consumer's experience? Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes. In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas. How can you support these continuously changing requirements?