Rise above your silos during business critical events

Date Posted: February 11, 2021

The 80/20 effect is particularly salient in consumer goods. Depending on your industry, yearly revenue can be determined by weather or holiday-driven selling seasons, a few key promotions, big product launches or unexpected consumer trends. 

Because of their outsized impact, these business critical times are the best opportunity for you to drive change and create an outsized impact on your company. You can rally colleagues across sales, marketing, supply chain planning and finance around them, and more easily break down silos that normally get in the way. 

It’s still a tall task, but cross-functional analytics can help align teams both leading up to and during high-stakes events. Leveraging a shared source of truth, you can target the most common sources of planning and execution errors to ensure that peak consumer demand turns into dollars.

Forecasting and preparing for business critical events

Take advantage of all relevant data to help get inventory pre-loaded in the right amounts at the right places before events that drive most of your sales.  

1. Use historical POS and retail inventory data to create forecast baselines

When you create forecasts only using orders or shipments from last year, you fail to account for some of the most significant sources of error. Crucial details that help provide more accurate baselines get washed out. Ensure planners have access to POS data in a usable format for forecasting to improve planning and keep it aligned to execution.

2. Forecast unconstrained demand by accounting for out-of-stocks

Failing to account for demand that may have existed when you were out-of-stock creates an artificial, negative feedback loop. It leads to under-forecasting and ultimately, more lost sales. To avoid propagating the problem, your forecasts should use an estimation of unconstrained demand. Incorporate out-of-stocks to model what people would have bought if you were on the shelf all the time, not what they actually bought.

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3. Model event forecasts based on similar historical events 

Using A/B analysis to scientifically measure the impact of events will significantly improve your forecast accuracy for similar future events. You can then apply the relevant event lift to your POS baseline. Build your product launch curves based on similar product launches in the past. Measure the sales lift from historical promotions using test & learn to more accurately forecast the lift from planned promotions.

 

4. Work with your retailer to correct for historical allocation mistakes

You can also learn from past events how demand was distributed geographically and how well your retailers aligned inventory accordingly. Especially during short selling seasons, big promotions and product launches, you can’t assume they correctly allocate inventory within their network at the start or will replenish stores effectively. Identify DCs and stores that were significantly under or overstocked before to avoid the same issues in your coming event.

5. Continually track your internal forecasts against your retailers’ forecasts

Retailers have to forecast every single product they carry, so why assume they do a better job than your team? Depending on your relationship, you may be able to influence their forecasts if you notice them deviating significantly from yours.

Even if not, you have to prepare to meet retailer orders. Helping everyone internally understand how forecasts compare will preempt countless headaches. It can also facilitate an open dialogue with your buyer around forecasting to further build trust.

Preventing and resolving execution issues during business critical events

To avoid dropping the ball at the worst times, your sales and supply chain teams need to be in lock-step with your partners. That means staying laser focused on analytics from your manufacturing to the shelf. Problems can and will occur every step of the way, but the earlier you can intervene when reality starts deviating from the plan, the more value you’ll protect.

1. Ensure every team has continuous visibility into internal and retailer forecasts vs. actuals

For both orders and POS, everyone should be up-to-date on how actual sales are tracking against forecasts. That way every team will know as soon as reality starts deviating significantly from plan and can take action accordingly. Just as importantly, ensure any adjustments are then tracked and shared to maintain alignment across your company.

2. Simulate projected weeks-of-supply to get ahead of potential outages at your DCs

This forward-looking metric helps predict where outages may occur, empowering you to proactively mitigate the most significant risks. For example, if your team has sufficient notice there’s not enough product to fulfill coming orders, they can start moving inventory around, increasing production or negotiating those orders with retailers now. Simulate future inventory levels at your DCs based on incoming and outgoing shipments.

3. When possible, prioritize orders based on downstream lost sales

Despite your best efforts, orders will sometimes exceed available inventory in your warehouses. Minimize the impact on sell-through by taking store out-of-stocks and sales trends into account when deciding which orders you fill. You also need to consider factors like transportation costs, OTIF fines and customer relationships, but this metric should help you make revenue-maximizing decisions.

4. Identify lost sales due to poor replenishment and surface them to your retailers

During your peak selling season, big promotions or product launches, it’s especially important to do everything you can to mitigate lost sales due to out-of-stocks. You should continually look for stores with no inventory received and stores that are sold through with no inbound shipments. These markers point to replenishment issues within your retailers’ networks that account teams or customer supply chain should work with their counterparts to fix. 

5. Use proxy metrics to pinpoint likely execution issues at the shelf 

End-caps don’t get set up, new products gets stuck in the back or phantom inventory blocks fulfillment algorithms. These mistakes are costly and can be hard to identify at scale to catalyze action from your buyers. 

Bring in store-level POS analysis to help you spot them. During promotions, look for stores that should be running the promotion or end-cap but aren’t experiencing the same sales lift as other stores. During product launches or peak season, look for stores that haven’t sold any items within a given period to identify potential problems. 

6. Proactively identify static inventory and work with your retailer to sell it through

Even when you’re working closely with your partners to send inventory to the right locations, you may still have pockets of unproductive inventory. See where product is building anywhere in your network by tracking location-level weeks-of-supply across all your retailers and distributors.

The earlier in the season or event you can start taking corrective action, the more revenue you can recoup. You can adjust future orders and deploy stagnant inventory to shelves where it is more likely to sell through and avoid significant markdowns at the end.

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