Inventory Forecasting Strategy

As a result of the changing consumer demands driving dramatic changes in the retail marketplace to implement a true multichannel experience retailers must overhaul their inventory forecasting strategy.  Consumer demands are driving purchases across channels which in turn is driving changing into the inventory planning and forecasting requirements to increase flexibility in the inventory placement.  This requires retailers to expand big data and analysis requirements in order to take into account the many new variables that are impacting the forecast and the forecast strategy.  One of the greatest challenges for retailers is the rate and impact of changes that are buffeting retailers now based on new and changing consumer demands.

The combination of the consumer changing demands and the velocity of these changing demands is disrupting large legacy retailers’ abilities to react to the changes and meet the demands.  The physical and virtual channels are blending into a cohesive consumer shopping experience and this requires retailers to adjust their inventory forecasting strategy.  These adjustments focus on an increased velocity of forecast and replenishment cycles, along with the fluid movement of inventory across channels based on changing consumer shopping and purchasing demands.  

These changes require the forecasting strategy changing to incorporate and analyze a great deal of information to be processed in much shorter cycles.  Internet time takes on more importance now for retailers and especially large legacy retailers and Internet time dramatically increases the velocity of changes to inventory demands.  These changes in velocity of inventory demands and especially demand across channels requires much shorter inventory forecasting cycles in order to support the need to quickly adjust to the changes in demand.  The demand for a product can explode in an extremely short period of time and by the same token it can also drop in short period of time and these discontinuous fluctuations in inventory demand wreak havoc on forecasting.

Large national retailers have additional complexity in their inventory forecast requirements based on fluctuations in regional demand for products.  These demands can actually provide benefits for both early reads on product demand and also, on the flip side, an outlet for overstock liquidation.   It is completely unrealistic to believe that retailers can meet all of the changing demands and this means that retailers must account for inventory fluctuations in demand in their forecast strategy.  This is where large national have an advantage of an early warning system for potential demand and then a natural outlet for overstock at the tail end of the cycle.  This provide some leeway to the forecast accuracy and should also be taken into account in revisions to the retailer's inventory forecasting strategy.

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?