Prepare Yourself for Holiday Inventory Planning, Like a Pro.
Excited for holiday season? That’s a lame question to ask! Who wouldn’t be excited for holidays?
To make our holidays enjoyable, who helps us in making it more exciting? The restaurant owners, caterers, eCommerce companies, shop-owners, event planners, entertainment companies etc so as to make their customers happy and earn profits!
This blog is a discussion on tips and tricks for successful holiday stock planning by retail stores or brands. How businesses do their stock planning before holiday, during holiday and after holiday season will decide their bottomline for that year.
Few tips to be prepared for a successful holiday season
By taking customers survey and feedback on their expectations or requirements will always help companies to understand what is going to make a store more appealing and can plan on strategies beforehand to improve sales.
- Comparing previous year data helps businesses to plan for their upcoming season sales.
- Keeping a note of mistakes done in previous sales period and strategize on making the upcoming sale more productive.
- Keeping up with the recent trend by being updated with social media happenings, upcoming movies, shows and events in order to design products and advertising strategies to successfully attract customer with relevant deals.
- Making the store more customer centric in order to drive repeat business, making it more organized to earn customers loyalty and profits.
- Planning on product promotion through banners, social media sites or by organizing product launch events to reach more people and generate sales.
- Tracking the amount of time taken for a particular product to arrive. This will help in keeping up with inventory level planning.
- Placing orders in advance to be ready with the stocks well before the start of holiday season to avoid any last minute rush
- Using an Inventory Management tool for inventory planning, to be updated with online or offline sales of a particular product.
- For online sale, using a omnichannel platform to maintain multiple channel visibility will help brands to expand their business across channels
What needs to be done as you approach the date of holiday rush or during the holiday?
It is all going to take most of the time in planning out the marketing strategy to attract customers. This is regardless of the fact whether the company is into selling fashion apparels, electronic items, home decor, vehicles or whatsoever. Towards the end of the article, we will talk about a successful product launch by a major electronics brand. It’s interesting to note how their first launch was a major failure and then subsequent launch during holidays brought them to the promised land. Exciting story ahead, but for the time being let’s discuss few things that brands need to be doing as they approach the season:
- Brands will have to carefully plan on marketing their businesses to gain sale through different mediums like: radio, TV commercials, flyers, social media sites or promotional email.
- Targeting right customers when planning for campaign through Google / Facebook PPC and in social media. Segmenting the right audience and then aggressively going after them results into increased sales vs mass marketing.
- The more the offers during holiday season, more customers get attracted towards the store. Offers can include heavy discount on products, while ensuring minimum required profit margin, providing freebies to customers on spending particular range of amount in shopping from their store.
- Urging buyers to post a selfie with product and coming up with a contest on social media for them to win free goodies from store. This can be a game changer for consumer brands. Consumers have a habit of following social media religiously. Getting few early adopters to post their selfies on social media can create a viral effect that too organically. Brands can also create mass following by getting celebrities to post selfies on social media using their products. This has a huge pull and can bring in exponential high sales.
- Readiness to procure items in short notice, they can plan to set their reorder point and be ready with stock replenishment plan. Otherwise, can buy extra inventory in advance and maintain safety stock.
- Store with multiple locations should be ready with a plan to transfer their stocks from one location to the other if last minute surge happens at one location. In case of eCommerce, quickly the fulfilment can be routed to the other location. You will require a multi-location WMS solution for that.
What if the stocks are still left in bulk after the season rush? What should stores be doing in order to avoid huge loss on the left out or unsold products?
Managing Business after Holiday Season
After holiday season is all about clearance. If the inventory level looks easy and the stock is almost cleared, plan on restocking the store with new goods. If not, then you need to plan for clearance sale on slow moving products.
- Providing heavy discount on slow moving products. Companies can plan to sell overstocked products at low prices.
- Strategizing on selling products with one on one offer. Brands can apply offers applicable on these products as one on one or one on two sale offers in order to clear the stocked up items.
- Distributing discount coupon to employees as a token of appreciation for successful implementation of holiday rush.
- Open a poll with employees to suggest clearance idea and provide goodies to the employee and family for the best suggestions.
- Making a note of mistakes done this time will come handy with the start of next holiday planning.
At last this is all about maintaining profits and improving sales and marketing in the retail (online and offline both) industry.
We are sure there is a lot more to these suggestions. It is not that easy to carry out the above process. The main issue is definite on practical implementation. Ones the brands start getting hands on experience, it starts getting nonchalant in executing the plan successfully.
It is always imperative to start planning as soon as possible for the big holiday rush like, Christmas, New Year, Halloween etc for a successful year ahead.
Now let’s talk about the major brand that used holiday season to promote their new product line.
Successful Product Launch by Phillips during Holidays
Philips being one of the largest electronic company across the world came up with a new product launch, Philips Air fryer, in July 2012. The company thought it would be a great success without running a whole lot marketing campaign or promotions. As, this product provides healthier and tasty food with 80% less oil consumption, company thought more customers would be interested in buying without much persuasion.
Problem with Initial Launch of Philips Air Fryer
They faced lot of issues with the launch in the market as the cost of the product was high and was used to prepare only 2 to 3 dishes only. Also, the big question was, how cooking without oil would make the food taste good.
This failure was right before the holiday season. A failed product during holiday means dead inventory and end of life for the product. However Phillips didn’t want to wind down so easily on its Air Fryer, hence assorted to a bunch of aggressive moves to drive much higher sales during holidays.
Subsequent Actions and then the Final Launch of Philips Air Fryer
So the company came up with an idea to launch smart marketing campaigns for the product to educate the customers.
In order to improve search results on Google, Philips marketing team came up with an idea of promoting on social Media and YouTube channels by starting an online cookery show.
The YouTube channel featuring healthy daily recipes through an online chef celebrity and sharing it on social media, promoting the recipes with 80% less oil.
After their campaign was live across the social platforms, they started getting engagement from customers and their sale started boosting up.
Digital media is a huge platform to grab the attention of the targeted audience only if used correctly. Philips Airfryer has used it wisely whether it is targeting audience through video, creating interactive contents on Facebook, uploading videos or opening a community forum. They have used it all to leverage the product recognition and to create awareness about it.
The whole campaign helped them to connect with more audience and increase sale by 266%.
Below is a beautiful picture of Philips Air Fryer.
Happy Frying Without Frying 🙂
International Order Routing for Amazon Multi-Channel Fulfillment (MCF)
Finding it difficult to manage orders from multiple channels? Or is it an issue of setting up warehouses to expand your business internationally?
Not to worry, Amazon FBA has it all sorted for the brands wanting to multiply their business across geographies and channels.
Amazon MCF – Boon for multi-channel sellers
Amazon FBA has expanded further allowing its sellers to use FBA for non-Amazon orders as well. Being a seller using multichannel fulfillment (MCF) at FBA, a lot of companies have been utilizing it as an advantage and running their businesses across channels. They drive sales on products from eBay or other online websites and web stores on Shopify / Magento etc. Amazon takes care of warehousing, shipment & return process.
Amazon MCF is available in USA, UK, Canada, Germany, Spain, Italy, France and Japan. To be eligible in MCF, brands have to list their inventory on Amazon for sale as well unless they are registered with their Pro Merchant accounts. Using their Pro Merchant accounts in MCF, brands are allowed to sell on non-Amazon sites without listing their inventory on Amazon.
Now let us see how multi-channel fulfillment works with FBA:
Step by Step Guide for MCF Process:
- Open a merchant account on Amazon
- Selected inventory is submitted to Amazon fulfillment center
- Create inventory listings for those products on required websites (other than Amazon)
- Customer buys the product from another channel
- Create a shipment order with Amazon as per chosen shipment option along with customer details,
Standard (3-5 business days)
Expedited (2 Business days)
Priority (next day)
- The order gets picked, packed and shipped by Amazon
- Tracking details get shared with the customer In order to process the return, Amazon receives the returned product and adds it back into the inventory if it’s in sellable condition.
How FBA handles International Amazon Orders
Brands wanting to sell in multiple Amazon sites such as UK, France, Italy etc can create a connection between their primary FBA location (for example US) and other international Amazon sites using Build International Listings tool:
- By clicking on the above link, start with building an international listing
- Select your source and target marketplace
- Create offers to be applied on inventory
- Define pricing rule as per your currency
- Set the shipping priorities, whether by self-fulfillment or FBA
- Review the settings and continue.
Source Marketplace is where sellers have set-up their primary Amazon seller account such us USA. Target marketplace is the place where sellers want to expand their business to such as European Amazon sites.
After setting up their pricing and shipping settings according to the International Shipping charges, the listing done in source marketplace will be shown in the target marketplace where they can change and adjust the prices accordingly.
Clicking on Language switcher at the top right of the page, one can switch between the marketplaces where changes in settings are required.
Selling Internationally outside of Amazon and fulfilling using MCF from Single FBA location
Amazon allows shipping international orders from supported FBA locations. So for example, if you are running a Shopify store focusing on UK, you can still fulfil those UK orders from the USA FBA. However as the volumes increases, this becomes increasingly more expensive to ship internationally. Hence brands need to analyze their order patterns and establish local FBA locations.
International FBA setup
Amazon has separate warehouses available in different countries. So, if you receive an order from Canada, you will want to have your products delivered from Canada FBA; on receiving an order from Mexico, you will want it to be delivered from Mexico FBA to avoid extra charges applied for distant delivery. In order to do this, follow the following process:
Open local FBA locations in countries wherever major volume is coming from.
Link the local Amazon store with the local FBA setup
Selling Internationally and fulfilling using MCF from Multiple FBA location
Once a brand opens multiple FBA locations and is generating orders through sources other than Amazon in local markets, it creates a problem to route the orders. Amazon doesn’t provide any solution currently to dynamically route orders to different FBA locations.
This can be solved using a dynamic order management solution that has advanced order routing capabilities. If the solution has ready integration with FBA and other channels from where the brand is getting orders, it can help to reroute the orders to nearest FBA warehouse.
This order rerouting feature will help you avoid extra charges involved in distant delivery with FBA. At the same time, reduced delivery timelines will ensure happy clients and hence better brand perception.
Detailed Process of Order Routing between Multiple FBAs for MCF:
The brand registers with the order management solution
Integrates the required FBA accounts along with other channels
On receiving an order which needs to be fulfilled by Amazon, it can fetch the customer details and depending on the distance and stock availability can route the order to the nearest FBA location that is able to fulfill the order.
This is a powerful capability in a competitive market. Brands are increasingly going global both via Amazon and through other sources. This setup enables them to grow their business across geographies without having to worry about opening fulfillment centers on their own and also save tons of costs by doing local fulfillment using FBA enabled MCF.
Spotlight on your key business objectives with Amazon MCF and proceed further with a favored opinion. Go selling!
Proven Method to Inventory Forecasting and Accurate Budgeting – By EasyEcom
Let’s have a look at this graph which is a typical supply chain management lifecycle curve. This graph explains the inventory management system cycle for SKU ID 100324. After we consider various factors affecting inventory levels for the SKU across geographical locations, competition, feedback, promotions, Supplier time, etc they reach four critical numbers.
- Maximum Stock Level:
This is the optimum stock level for the particular SKU. In this case it is 100.
- Reorder Point:
At this stock level, a new purchase order is generated. This number is arrived after considering the time taken by the supplier to deliver the goods in the warehouse. Here the reordering point is 42.
- Low Stock Warning Level:
This level is the warning level for the SKU going out of stock. In this case it is 15.
- Restocking Level:
This is the level after the reordered quantity is delivered in the warehouse. In this case, the number is 90.
Now imagine doing this for all the SKUs in your catalogue. In a supply chain, the above graph poses some difficult questions. The biggest dilemma that an organisation faces is related to the inventory levels for its products.
Every merchandiser wonders about these questions:
How much should I order/manufacture?
When I should start the reordering process?
Inventory forecasting is the process adopted to efficiently answer these challenges.
What Is Inventory Forecasting:
Inventory estimation (forecasting) may be defined as a process of predicting inventory in future time periods. More specifically inventory forecasting is a scientific approach of predicting sales during a specified future period based on the proposed marketing plan and a set of uncontrollable and competitive forces.
All this may sound very difficult. But this becomes really straightforward if you implement the right solution. Below I will show you an example of the same.
Factors affecting inventory
There are several internal and external factors affecting sales for an organisation:
- Seasonality of inventory
- Technological failures
- Labour issues
- Supply chain related factors
- Change in government laws
How to use Inventory Forecasting Software To Predict Demand Accurately
Forecasting inventory will ultimately determine the fate of your retail business as it’s a big factor in profitability figures. Any system used, needs to consider purchase or sales made in previous month; previous season or any custom duration depending on the upcoming time period.
To illustrate this better we are going to use the examples of EasyEcom’s Inventory Forecasting software.
EasyEcom software helps to overcome hurdles involved with calculating the sales and planning inventory with ease. It helps you to plan future sales based on your previous history.
Let us look at scenarios where EasyEcom can be helpful:
Inventory Forecasting Scenarios:
Inventory planning based on previous month sale
In order to plan your inventory for next month based on previous month sale, you need to provide the number of days you want to plan the inventory for (in this case, 30 days) along with the range of days you want the inventory planning to be done based on (in this case, previous 30 days).
To be specific with a particular product or vendor, you can further apply a filter based on the brand name, SKU or vendor name.
The system will then provide you with the suggested quantities to fill your inventory with, based on the previous month average daily sale. The suggested quantity also calculates the time taken by the vendor to deliver the products.
Inventory planning based on previous season sale
Similarly, the system will provide you with the suggested quantities to plan on upcoming Christmas holidays, based on the sales made during last Christmas. For this, select the number of days you need to plan for (in this case, 60 for December and January month) and date range based on previous year custom month, December and January.
With that being done, you also have to look after the fresh stocks currently available and are moving out faster. For Christmas season inventory planning, applying few additional factors (for holiday rush) on fresh stocks can help you avoid losing new/existing customers.
Iterative Inventory Forecasting
So, when it comes to forecasting, a lot of uncertainty is involved for any organisation. In order to reduce the adverse effect of these uncertainties, an organization can take an iterative approach towards determining the inventory projected in future.
For example, a subscription-based web business ought to be able to project website views based on its organic search placement, paid advertising, email marketing, and other alliances & promotions. Make a projection of traffic by summing up your sources, then estimate the conversion rates, and that gives you unit sales.
Now as time moves on, we need to make changes in the assumption. For example, if we predicted 10% month over month growth rate by spending $5000 per month on advertising. However, due to budget cuts, the company can only spend $3000. That will cut down the traffic by 40%.
Similarly if suddenly a competition decides to discontinue their services, suddenly the conversion rate might shoot up by 30-40% hence boosting the inventory demand. Generally quarterly or monthly revisions in predicting mechanism are recommended. This depends on the nature of the company products and time required for a feedback cycle to complete for that particular assumption.
Advantages of Inventory Forecasting:
- Happy Customers:
When a customer gets the product without a delay, they tend to trust you more for their needs. This helps in repeat purchases and loyal customer base. Consider a scenario where the customer would require a product on a regular basis which, if not procured on time may affect his business. If he is able to purchase the product and get this delivered on time, he will be a loyal customer for life.
- Reduced Stockouts:
This is one of the most talked about yet common issues among retailers for sales loss reasons. Factors need to continuously optimized to get a better estimate trend. An accurate forecasting method not only ensures lower inventory idle time in warehouse but also less operational cost is required.
- Efficient Production Cycle:
Forecasting involves closely monitoring present inventory to understand future. Responding and adopting to the changes or pattern of consumption by the consumers gives better idea how the future is going to be.
- Lowering Safety Stock:
When your inventory forecasting process is accurate, it increases your reorder capacity and thereby reducing the safety stock level to free up capital. If a business is using a proper forecasting to plan then you don’t need to carry high safety stocks to manage your inventory.
- Reduced Idle Stock:
Obsolete inventory is a big burden on the margin of any business. To reduce the burden, it’s very essential to identify, repurpose or removal of obsolete inventory. It decreases the volume of inventory on hand and subsequently both direct and indirect costs of keeping the obsolete inventory will be reduced. Having a reliable forecasting inventory method will reduce ordering any excess stock and increases net profitability.
- Managing Manpower Better:
When a business suddenly starts to grow, manpower requirement is also increased to handle the operations. So an inventory forecasting report helps the organisation be better prepared for a sudden growth in future inventory with a proper manpower planning in place. For example in the case of subscription business, if the inventory is going to shoot up in few weeks’ time, the recruitment effort have to start immediately in order to be able to fulfil the inventory.
- Better Pricing and Promotion Strategy:
With a better co-ordinated and planned promotion strategy always yields better results. With an integrated distributor-level promotions and related forecasts helps to improve the flow of goods. It also achieves better results in terms of availability and stock fill rates.
- Better Supplier Negotiation:
When you know exactly when and how much you are required to order; the negotiation becomes easier for you. The supplier is also aware of the kind of business he can expect from you and hence gives you a better price. By having a negotiation based on logic and research you are positioning yourself as a credible customer who wants to have a long-term relationship rather than one-off spot buy.
- Plan Sales Strategies:
Forecasting is very helpful with Product Management, Marketing and Product Design planning. Decisions on promotions, pricing and purchasing are made with data derived from inventory forecasting. This has a positive impact on the sales and profit margin.
Benefits of using Inventory Forecasting with software like EasyEcom:
- With inventory aging report, we can identify stale inventory. End of season sales offers can be created for such inventory to free up the working capital
- Plan inventory based on multiple sales channels and offline sale combined together
- Flexibility in planning inventory based on different time frames (sales velocity during holidays vs regular time)
- Receive automated alerts at inventory reorder point
- Ability to accept backorders in case demand goes over the board. New purchase orders can be created for respective vendors for the backorders.
How to Measure Inventory Forecasting:
When you have data available, anything can be measured but to accurately forecast inventory, the focus should be on those data points which are relevant. Before we jump into how to do inventory forecasting, we need to consider few crucial points.
A Forecast Accuracy Metric That Is Objective, Quantitative, And Manageable.
Deciding what to forecast?
Level of aggregation: Individual products or product groups? Weekly, monthly, or quarterly inventory? Units of measurement: units or dollars?
Determine How Often It Should Be Measured
Feedback cycles of each assumption used in forecasting
But one thing the management needs to understand that no matter how sophisticated the forecasting techniques you use, forecasts will never be 100% as it involves factors that are not controlled by you and a lot of uncertainty involved in it.
Techniques Used To Measure:
While forecasting inventory, there will be two sets of products. First is for the products that has stable inventory and has past data available. It can be forecasted more accurately. The second type of products are items that are new, low volume and innovative products. It is very hard to predict an accurate forecast with considerable uncertainty involved. And to make the problem more complex, there are zero historical data and some assumptions have to be made to calculate inventory.
The techniques used can be broadly divided into 4 different categories.
- Trend forecasting:
These are forecasting methods. When a particular type of upward or downward trend for a particular product is involved, this method is used for forecasting. The double exponential smoothing, regression, triple smoothing etc are few techniques popular in this category.
- Graphical forecasting:
When you have data and you convert them into graphical representation, it conveys the pattern visually. Visual representation of data is easier to comprehend. This technique can give you a general trend without getting too much into understanding the data. Previous inventory exploration, trends and patterns help you forecast easily.
- Qualitative forecasting
When historical data is unavailable or irrelevant or are scarce, the forecasting is done based on intuitive or judgmental evaluation. When a new product or a new innovation is launched, this scenario arises. Some typical qualitative techniques are based on personal insight, sales force feedback, panel consensus, market research, visionary forecasting, and the Delphi method.
- Quantitative forecasting
When a historical inventory data is used to project future inventory, it becomes more accurate and relevant. The available data and the other relevant factors are taken into account while forecasting the future inventory in these methods. The popular methods adopted by organisations are the Extrinsic and intrinsic techniques, time series forecasting methods (relying on past data) supplemented by qualitative judgements.
Inventory Forecasting Best Practices:
Keeping few very crucial points in mind while calculating inventory forecasting gives maximum output.
- Get input from various stakeholders. Take input from Sales, Marketing, and Finance.
- Competitors sales data
- POS data
- Amount of obsolete stock
- Frequency of stockouts
- Measure Forecast Accuracy at the SKU, Location, and Customer Planning Level
- Adjustments Based on Feedback of Current Cycle & Focus on exceptions
- Talk with customers
- Review the data for trends
It is always very beneficial to have a great inventory forecasting team who work on a regular interval to understand the trend and derive accurate inventory forecasting method.
It is important to understand what kind of data is more important with respect to forecast accuracy. Is it the external data like competitor sales, POS data, sales team forecast or the internal data like stock-outs, shipments, orders, etc?
Apart from this, it is also important to determine which time buckets are most suitable for forecasting. For example, whether to use monthly time buckets or weekly time buckets for planning. All these factors changes from organisation to organisation.
Nobody can predict 100% accurate inventory forecasting every time. It is very essential to understand this and review the past forecast, learn from the trends and improve the accuracy.