Managing seasons is important for almost every retailer. In some sectors, such as fashion, it’s absolutely vital to a company’s profitability. The holiday season is the obvious example. But while many crucial decisions have long since been made by the time it starts, there are still lots of ways to improve your effectiveness during the season.
Seasonal Planning Based on Product Characteristics
Pretty much the only thing all seasonal products have in common is that they’re seasonal. To make the topic a bit easier to understand, we have a simple rule of thumb for classifying seasonal products for supply chain purposes in terms of the length of the season, as well as for the lead time of the product (see figure below).
In fashion, as in many other areas of retail, most seasonal goods can be divided into either “short season” or “long lead time”, because in practice lead times often exceed the length of the season. This means that stock must be ordered long before the season starts and, once it’s begun, buying in additional stock from suppliers isn’t possible. So the focus of your in-season inventory management has to be on getting the most out of the stock you already have.
Optimizing In-season Management
With seasonal goods, nothing hits your profitability more than remaindered stock. So when the season has started and your stock is finite, you are now working at selling that stock at the highest price possible. You don’t want to end up trying to shift left over winter clothes at a 75% discount in May. So even though you can’t add to your stock of ‘Product’, you still have the other three of the four Ps at your disposal – Price, Promotion, and Place.
Let’s look at how we might approach each of these in typical situations that occur in managing seasonal retail.
Falling Behind the Sales Budget or High Projected Residual Stock
If you’re falling behind your targets early in the season, you should consider taking immediate action rather than just hoping that sales pick up. You can make use of moderate, early markdowns to try to boost sales – after all, as the old adage goes, the first markdown is the cheapest. We will look at markdowns in more detail in the next section.
If you’re falling behind your targets early in the season, consider taking immediate action rather than just hoping that sales pick up.
But in addition to price cuts, you can also use additional promotional actions, such as better displays within stores, or advertising. The earlier you act, the more time you have to plan and execute any promotion and that’s likely to work out both cheaper and more effective. Make sure you liaise closely with your marketing team and keep them abreast of the latest situation. Modern SCM systems give you increased visibility, as well as automated alerts at the first sign of sales falling behind or projected stock levels looking as though they’ll be high at the end of the season. Your system should warn you at the first sign of any issue, well before it would normally catch the attention of a manager.
Ensuring Mindful Initial Allocation
You’ll always end up with some stores selling more than expected and others less. If you’ve been mindful about the initial allocation and haven’t simply pushed all your stock to the stores right away, you can react to any deviations from the forecast much more effectively. Holding back stock in the DC allows you to replenish the stores based on the most up-to-date forecasts rather than forecasts made before the season. That allows you to avoid moving stock between individual stores, which is typically quite difficult and expensive.
So while the cards have been dealt, depending on where you keep them, you can still play the game very differently and end up with very different results. Focusing on what matters is deceptively simple but all too easily forgotten in the frenzy of the season itself. Just concentrate on making those decisions that have the biggest impact on your bottom line and leave the rest for automation. To best do this create a set of early warnings within your SCM system that alert you to undesirable situations that might emerge and that you can take action to prevent, at least for some SKUs and/or stores.
The sooner you take action, the smaller the negative impact of any situation will be. In many cases you might even be able to completely prevent problems from materializing.
While it’s a good discipline to use your business intelligence and data to reflect on what’s gone well and where improvement is needed, the data is even better used early-on to improve your decision-making.
Which brings us to the second point: the sooner you take action, the smaller the negative impact of any situation will be. In many cases you might even be able to completely prevent problems from materializing. Even if you can’t, you’ll be far more able to mitigate any damage. Having good visibility on the current and projected status of your supply chain allows you to act early and get the most out of your season.
So if you’re going to remember anything while you’re busy managing a season that’s already begun, it’s those two simple rules; focus on the important stuff, and act early.