Coping with changes in the rate of sale is a must in the current retail environment. With Black Friday, Cyber Monday and similar sale peaks putting huge pressure on the supply chain, the ability to predict and prepare effectively should be built as a standard practice to retail forecasting processes.

If you can catch it right and ride the sales, these peaks can be very profitable and, if positioned right, even more successful the year after. But, what if you’re one of the retailers that fail to forecast correctly and burdened with selling off excess inventory at a loss? It’s at times like these that expert systems like supply chain optimisation inventory solutions bring full value.

Typically humans react too quickly to changes and give too much weight to recent events even though they are probably well within the bounds of normal statistical distribution. The key to tackling these change situations effectively is to bring together statistical forecasting with human insight.

Having a solution that can map and predict these exceptional situations and present the data for effective manual checking and commenting enables supply chain teams to forecast far better. A good system gives a dispassionate overview of the situation, directly comparing recent and historical changes. In this context, managers can quickly make a judgement whether a change is ‘just one of those things’ or linked to specific external or internal factors and thereby plan for future occurrences.

With the new world of multiple seasons and events, it’s critical that retailers develop a continuous planning process where demand and stock planning is seamlessly linked to supply chain capacity. Having that kind of capability enables the building of a stock allocation plan that can actually be fulfilled at reasonable cost. What’s more, with an agile system, different demand scenarios can be run to check whether the stock allocation and supply chain plan can support sales in extreme circumstances – and this can forestall disaster.

As demand uncertainty continues to grow, retailers that harness forecasting ability to optimise availability and inventory will benefit not only from exceptional customer service but also happy shareholders and owners.

Take a look at the first two parts of my series to find out more about successfully forecasting for promotions and new products.

Mikko Kärkkäinen

Mikko Kärkkäinen

Group CEO, D.Sc. (Tech.)


Phone+44 7802 658 237

Mikko Kärkkäinen is the Group CEO at RELEX and the author of more than thirty papers on logistics and supply chain issues delivered at conferences or published in leading magazines.

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