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Monthly Archives

December 2015

dear-santa-an-inventory-management-wish-list

I grew up writing letters to Santa at Christmas time, asking for all a child’s heart desires. Bicycles, ponies, footballs, puppies, and more. I know a lot of you did the same. But do you ever take the time to write out your wish list for your business? If you were to sit down and write out a inventory management list, what would be on it? From talking to our customers, we’ve found a few running themes both on the retail and manufacturing sides. Here’s our typical new customer’s wish list:
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why-some-vendor-managed-inventories-explode-on-your-shelfCollaborating with vendors is something every retailer does every day.You set up promotional plans, create POP materials, make co-op marketing agreements, devise better training programs and a thousand other things that set both vendor and retailer up for success. Cultivating relationships are key to making things go more smoothly. But most retailers have difficulty supplying vendors with one piece of communication, and it can become a big pain point.
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6-seasonal-index-mistakes-you-dont-want-to-makeSnakes! Why Did It Have to Be Snakes?

Dr. Henry
Walton “Indiana” Jones uttered this famous line in the movie Raiders of the Lost Ark released in 1981. The scene begs the question does ‘Indy’ think alligators would be better than snakes or maybe lions? Indy is asking the wrong question at the wrong time.  Often the business problem that envelops our company will be misdirected by leaders asking the wrong set of questions that fail to address the root problem.  The result is a bad solution that delivers the same bad results.  Seasonal curves in businessare created by events that repeat on a schedule. That schedule can be the first week of every month, a season like spring, a holiday like Thanksgiving or an event like a Super Bowl. They all repeat based on a time schedule.

Most legacy inventory management software doesn’t have the math to manage seasonality correctly.  While a seasonal index is just a multiplier used with a base forecast, the real issue is how to determine the base forecast and the multiplier.  People review the simple math needed and fail to realize the real questions should be focused on how you are calculating the index (multiplier) and base demand forecast.

In the 15 plus years I worked in retail and later for software companies, I can say without question the two biggest opportunities for business are in managing seasonal inventories and lead time (see my last post).  Today I have a brief slide share that my friend and associate Heather Palmer assembled on the 6 seasonal index mistakes you do not want to make. A translation of that title is these are the 6 mistakes we see the most often that are the easiest to fix and have significant ROI.

The reality is too many people ask the wrong questions, forget about bad results as they run to the next season’s fire drill; doomed to repeat the same mistakes and bad results over and over.  Maybe this is the opportunity to stop asking the wrong question and ask yourself: Do You Make the Same Seasonal Error Seasonally?

Watch our slide share: 6 Seasonal Index Mistakes You Don’t Want to Make 

Do-You-Make-These-Mistakes-In-Your-Service-GoalsDecember is a time when many retailers are trying to manage orders to meet end of year inventory goals. How do you decide which items to buy and which items to cut? If you are trying to maintain the same instock level on every item, you are going to end up buying too much of some items and reducing orders on best sellers in order to pay for it. You can avoid this pitfall by managing service levels rather than focusing on instocks.
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5019000002026111_zc_v9_sales_forecasting_and_demand_forecasting1In our last newsletter, we talked about the differences between Demand Forecasting and Sales Forecasting. As a follow-on, this letter highlights several of our posts that reveal how Demand Forecasting can increase overall forecast accuracy (how’s 98% sound?) and how Sales Forecasting is not the way to go for replenishment. The first : “Does 98% Demand Forecast Accuracy Get Your Attention?” is a top web download. You’ll read how to improve your forecast accuracy to reduce inventory while at the same time increasing sales.

Next, our essay featured in the Retail Value Chain Federation’s (RVCF.com) newsletter talks about the differences between Demand Planning for Replenishment and Service Driven Replenishment. The differences while subtle have a huge impact on your bottom line due to the rapid swings in the marketplace today that don’t allow for the slower response times of legacy systems.

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6-Seasonal-Index-Mistakes-You-Dont-Want-to-MakeWe all know snow shovels aren’t going to sell in the summer and beach towels will flop in December. Most of us can identify general seasonality and spot a really bad seasonal index by applying simple common sense. But do you frontload your key seasons or reduce orders because your Replenishment System doesn’t quite get the job done? You might be running into these common seasonality issues that cause retailers big headaches. The irony of seasonal index errors is they are one of the few things where an Excel file can actually solve the problem; yes shocking, we all thought Excel was a report tool.

The key point to remember – a seasonal index is just a multiplier to run against the base forecast. Some software solutions will lose you with a discussion using words like multiplicative and additive. While the discussion has merit, these terms only describe seasonality math, not how it needs to be applied in replenishment or even what numbers are needed in the seasonal index math. A seasonal index is multiplicative and a market force is additive against the base forecast…but then I have gotten ahead of myself.
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