Supply Chain Forecasting Accuracy

Forecast accuracy is probably at least one of the most difficult practices within the extended retail supply chain .  The seasonal planning generally practiced by the larger retailers is a very difficult target to meet because of the fluctuations from weather and consumer purchasing fluctuations.  The changes in the retail purchasing channels and consumer shopping and purchasing practice changes and demands have only added to the difficulty to plan and forecast accurately.  The results of the missed forecasts are easily evident in the retail outlets from the amount of markdowns which seems to be growing.  How can retailers overcome the challenges of changing consumer shopping and purchasing along with a quickening of the product change cycle?

In many ways retailers have brought these difficulties on themselves as a result of their changes to the seasons.  Christmas sales practically start in September now and are overrunning sales for Halloween and even Thanksgiving, it is barely July when back to school and fall products appear on the shelves.  These extensions of the key shopping holidays seem to be the result of the desire to support lagging current season sales with the next.  These practices though add to the level of overstock product that must be sold at reductions.  This cycle continues the spiral of increasing overstock that diminishes the retailers profits.  This cycle also makes it very difficult to plan and forecast for inventory to support the sales.

This is where the fast forward retailers enter the equation with a shorter cycle and continuously updated product to interest the consumer.  These retailers have identified and are continuously adjusting to the demands of the consumer with shorter product cycles and continuously turning inventory.  This gives the consumer a reason to regularly return for fresh product offerings and by the same token, the overstock is also liquidated on a more frequent cycle.  There are the same winners and losers in product sales and because the replenishment cycle is shorter there is a greater opportunity to weed out the slow selling product while the strong selling product can be replenished.  This shorter cycle may increase costs for both product manufacturing and transportation however there is a greater cost elimination for product overstock liquidation that I think offsets the increased costs.

There is another benefit to the shortened product life cycles and that is an increase in consumer interest and frequency of returns to the store and the eCommerce sites.  This alone is a powerful reason for retailers to revise their planning and forecasting cycles; it changes the consumer interest from checking for price reduction on product they wouldn’t pay full price to consumer interest for new products and willingness to pay full prices so they don’t miss out on the product.  One of the most difficult jobs for retailers is generating consumer interest to return frequently and this process of shorter product life cycles and ‘fast forward’ retailing is a great tool to help to generate interest and draw consumers to return.

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?