December 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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Chinese New Year: Its Coming, Is Your Supply Chain Ready?
Chinese New Year starts on February 8, 2016. Most retailers are familiar with Chinese New Year because every year their Chinese suppliers and factories shut down for a few weeks. Chinese New Year is a huge celebration for China and many surrounding countries. Workers head home for a much deserved vacation that can last 4 weeks or more, leaving quiet offices and empty factories. That means nothing is shipping and that can result in empty shelves or managing the cost of overstocks- if your Inventory Replenishment software bought the right products.
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The key to successful Demand Driven retail is leveraging the right data in the right places. Lost Sales data has a lot of leverage that, when ignored, can be your demise; however, those that successfully measure and leverage Lost Sales data will see sales and profit gains. Our Lost Sales blog today outlines how lost sales data can be used to improve inventory optimization and highlights how all the pieces are interconnected. We also dive into the differences between lost opportunity and lost sales, the differences and impacts between the two, and close with some sobering statistics from Lost Sales data collected from the industry.
Our first blog on Lost Sales highlighted the staggering impact of Lost Sales in most businesses today. We outlined some of the methods used to calculate lost sales, and why these methods do not deliver value. Our second Lost Sales blog reviewed how lost sales can add value to demand forecasting and improve the accuracy and value for the service attained calculation.
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Our last blog highlighted the staggering impact of Lost Sales in most businesses. We outlined some of the methods used to calculate lost sales, and why these methods do not deliver value. We touched on in-stock and Service Attained as two measures that in the past were acceptable inventory ROI measures but, in the market place today, these methods are dated and focus retail in the wrong direction.
With the advancement of inexpensive hardware, we can calculate a very accurate demand forecast across any block of products in our assortment and measure the business at any individual (or group of) product / locations. We can easily track available inventory for any product/location at a moment’s notice. This makes calculating lost sales a simple calculation: sum demand for the days where available inventory <=0. Today, we will review how lost sales impact demand forecasting, service attained, and inventory optimization.
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