Does Your Forecasting and Inventory Replenishment Software Prevent or Encourage Fires?

baby-its-cold-outsideHow often I walked into the corporate office of my former employer and thought ‘whew, is it HOT in here’? Knowing I was headed for budget and planning meetings that were going to steal my day with the end obvious result: wrong products and /or wrong locations.

How can you survive when customers expect new product almost monthly? The expectations of customers and the resulting changes to their shopping habits have been dramatic in the past 3 years. In the past a retail/ wholesale company could change product assortments 2-4 times a year to keep customers satisfied. Today social media has forced a new world order where product assortments need to change monthly to meet customer expectations. How do you respond? The great ‘idea’ is to find new sources and buy new products more frequently, operating more like the grocery industry has for years, right?!?! (just pretend the 60+ day lead times will not matter)

 

Historically, retailers have managed their business with a plan. You continually update the (Demand?!?!) plan based on last month’s numbers and roll forward. This slow reactionary process needs to be replaced with a proactive process. The real issues in your supply chain software:

  1. Has Grossly inaccurate forecast.

  2. Lacks the ability to understand demand.

  3. Fails to account for lead time changes.

  4. Doesn’t highlight the real exceptions that need your attention.

Sound familiar? You spend the first part of your week fighting fires and the latter part of the week discussing how things need to be different going forward.

The problem is the new world shopping order doesn’t allow for a slow changing plan but the legacy software most of you are using is designed to be slow changing. In fact the very name Demand Planning is almost funny because most demand plans are really sales plans with an index applied across the assortment to slightly raise or lower the numbers from a previous period. The idea of managing the demand would require proactive thinking.

Today old product holds inventory dollars that prevent investments in new product, why? Are you using sales forecasting methodology or excel forecasting methods that were never designed for the amount of data available today and cannot achieve the accuracy needed, resulting in more fires?

My friends at Data Profits provided an excellent slide share on the fire prevention topic including 4 ideas that can help your business prevent fires. Also there are links to free downloads with solution ideas.

SlideShare link to Forecasting and Replenishment Fire Prevention

Please share this slide share with friends and encourage their comments.  I encourage you to post here some of the issues with legacy Demand Planning and Replenishment software that you see in your world today.

I look forward to your comments and ideas for the future.