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Monthly Archives

February 2013

Slow and Intermittent Product Demand Forecasting Facts & Myths

Slow and Intermittent products make up 35-40% of most retailer assortments.  These products often are critical to the assortment because a top 20% product is often paired with a selection from an assortment of slow demand product choices.  This large group of products in your assortment can ruin your turn goals and your GMROI when managed incorrectly.  There are two key pieces that must work together for a retailer to win with slow movers: the demand forecast and how the supply chain software uses the demand forecast to manage the inventory. The results of poor buying are low turns and loss of capital for other product.

Slow and Intermittent Product Demand Forecasting Myths

“How do you forecast slow and intermittent demand products?” The same question was posed to me in three different meetings at NRF this year.  Many software companies differentiate their demand forecast capability from their competition by highlighting their skill in forecasting slow and intermittent product demand; at the same time, they strike fear into the hearts of retailers by highlighting retail losses delivered due to poor demand forecasting of slow moving products.  The key to this discussion is to not get trapped into a no win conclusion. More than a great Demand Forecast is needed to attain winning results with these product groups. Like the story of the ‘Tortoise and the Hare’, Slow demand products are part of any assortment and can be big winners.

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Proof: Improving Forecast Accuracy delivers High ROI

A mountain of research today shows that improving forecast accuracy delivers a high ROI. Improved forecast accuracy, when combined with software that translates the forecast into demand driven events, will decrease inventory and operating cost, increase service and sales, improve cash flow and GMROI, and increase pre-tax profitability.

Lowering Inventory and Raising Sales at the Same Time

Many people are conditioned to accept mediocre demand forecasting accuracy. The most common excuses I hear for keeping inaccurate forecasting include: “We paid a lot of money for the software” and “The software does a good job with other operations.” The irony is that the same people, when asked if they shopped for better software, will respond no. The explanations range from they do not see the value to disbelief – there isn’t a better demand forecasting solution in their market. Businesses have reacted for the last 20 years by placing more value on the plan, a top down approach that costs more money and has lower returns.

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