The "spreadsheets and a prayer option" is no longer a sufficient response. And well-engineered promotions can result in failure if picking, shelving or transport operations fail due to insufficient capacity leading to extra process costs, poor availability and lost sales. So what's the solution?
Well the good news is there are a number of remedies.
Running channel operations more effectively is most definitely a good starting point. This may well mean operating a single stock pool and being more ready to shift stock from one retail outlet to another. Stock is stock and a sale is a sale. It may be easier said than done but it is totally achievable.
Running a unified operation and promoting collaboration through shared goals and joint processes is a must. You can’t have internal departments competing against one another, defending their own patch, inventories and goals. This integrated approach can have implications for supply chain organization and processes but the right supply chain management planning makes this kind of integration much, much simpler.
Retailer must make use of the vast amount of data at their fingertips. But they need the processing power and tools to analyse this effectively — mining big data is little more than creating a haystack in which to go hunting for a needle.
To successfully handle peaks in demand, retailers need to be able to turn this vast data pool into a powerful resource that provides better forecasting, dynamic snapshots of a business in real-time and instantaneous illustrations of the impact of supply chain decisions.
With multiple seasons and events throughout the year, a continuous planning process is needed, where demand and stock planning is seamlessly linked to supply chain capacity. That kind of capability enables the building of a stock allocation plan that can actually be fulfilled at reasonable cost. Moreover, as demand uncertainty is ever growing, with a sufficiently agile system, different demand or "what if" scenarios can be run to check whether the stock allocation and supply chain plan can support sales in extreme circumstances to prevent disaster.
That might sound like something that the big retailers are anticipating a few years down the track. But it’s already happening; that’s today’s reality in a lot of leading edge chains. If retailers are serious about competing in a world where markets are increasingly tough to predict because a new fad or event can boost demand at an incredible rate they need to ensure they're properly equipped to face the challenges head on. Failing to meet heightened customer expectations is not an option if retailers want to keep things calm post Thanksgiving, and protect their profits and reputation too.
Mikko KÄrkkÄinen is group CEO at RELEX Solutions.