Top tips to help retailers make the most of the festive period

2012 has been another challenging year for retailers as the turbulence in both financial and commercial markets continues unabated and as consumer buying habits continue to evolve at a pace. The big promotional events throughout the year, such as Christmas and the New Year sales periods, continue to represent huge opportunities for retailers to make the most of consumers’ increasingly selective readiness to part with their hard-earned cash.

The run up to Christmas is always a great opportunity to launch new products and this year is no exception with electronic retailers expecting big things from the recently launched iPad mini and Google Nexus 7, whilst toy retailers are going retro as they seek a larger slice of the €3 billion Christmas toy market with the re-launch of blockbusters from yesteryear including the Cabbage Patch Kids, Furbies, Teenage Mutant Ninja Turtles and Twister.

But how can retailers, particularly in today’s omni-channel retail environment, make the most of these opportunities and ensure that products arrive to fill store shelves in time, are delivered to a consumer in a manner and time that suits them, are available in sufficient quantities for the length of the promotion, and that there is not a huge surplus of residual stock remaining once Christmas and the New Year sales period are over? Here are a number of tips that will help retailers to match supply and demand.

1. Maximise availability

With an average retail out-of-stock rate of around 8% which can surge to 20% during promotions, availability is a huge issue affecting manufacturers, distributors and retailers wanting to take advantage of the sales opportunity presented by huge seasonal sales events such as Christmas. When measured along the supply chain, availability levels typically decline closer to the shopper. Service levels can reach 99% from the manufacturer to the retailer’s distribution centre but it is often down to 90% at the point it moves from the stock room to fulfill a store or direct consumer order. This underlines the critical importance of ‘the last 50 yards’.

Root causes of non-availability can be grouped into four main areas: inventory errors; forecasting; in-store execution problems; and lack of cross-channel process integration. But what kind of solutions address the root causes of non-availability?

  •  Integration of advanced in-store stock management systems to equally sophisticated execution solutions responsible delivering product to the distribution centre, and to the store and end consumer  should help provide 100% or near to 100% inventory accuracy levels.
  • Forecast accuracy will always be a huge challenge for retailers, particularly where a promotion revolves around the launch of a new product, but sophisticated technology solutions available today can help radically improve sales predictions during normal and promotional trading periods. Advanced integrated planning and replenishment solutions maximise sales opportunities by combining proven forecasting techniques with sophisticated demand cleansing, and day-of-the-week and seasonal profiling tools to help companies generate the highest return on inventory investment and ensure they have a plan to meet their goals.
  • In-store execution problems can happen for a number of reasons but insufficient replenishment staff, back-of-store warehouse management, shop-floor layout, unit and pack-sizes, and packaging quality are usually the most common factors preventing goods from getting to the shelf in a timely manner.  Labour management tools can help address staff levels required whilst sophisticated execution solutions in the ‘back-of-store’ warehouse environment are being used increasingly to equip retailers with the tools to address the peaks and troughs of in-store demand.
  • Order management solutions finally are being increasingly used in a multi-channel environment to take in demand from all channels and so that orders can be fulfilled using inventory from the location where it makes most sense to fulfil an order from to maximise service levels for the customer and maximise profit for the business. Distributed Order Management systems also enable cross channel processes, such as buy online and pick up or return to store.

2. Gain full visibility and control of the supply chain

Many companies still separate order management, product development, procurement and manufacturing from the final delivery process which makes it harder to have a single view of all inventory items in the supply chain and their status. All of these areas need to be synchronised for an organisation to run smoothly, to keep track of exactly where capital is tied up and to facilitate success, particularly when planning to capitalise on a big promotional opportunity.

Lack of visibility can create inaccurate stock replenishment and retailers cannot see which products are inbound, outbound, and where the stock is stored. Not only is this highly costly as inventory sits unused in warehouses but if there is no foresight into which products are the best-selling items or how the overall promotion is going, there is a higher chance they will sell out leaving customers empty handed. Consequently, it is vital that reliable, nimble and functional IT systems are in place to ensure managers maintain visibility of demand to fulfil orders accurately and to keep the same high standard of service across all channels.

Web-based ‘extended enterprise management’ software can remove visibility issues between supply chain partners by facilitating accurate, real-time data sharing between all partners, no matter how widespread a network is. Such software allows all purchase orders (POs), in-bound products, warehouse stock and deliveries to be viewed and updated online, without a cost burden to suppliers since all they need is an Internet connection. Installing supply chain best practice through modern IT systems also increases employee productivity as all data is automatically updated.

Forecasting and order management tools can be used to ensure that enough of the fastest selling products are re-ordered and routed to wherever demand is being detected and registered, thereby enabling the balancing, prioritising and streamlining of stock levels across the business. Bringing vital information to supply chain partners’ fingertips via sophisticated supply chain intelligence tools means the whole enterprise network can make smarter and faster decisions with regards to warehouse and distribution management. All of this is paramount, particularly during a big promotional event when speed is of the essence.

3. Build a scalable infrastructure

Tremendous peaks are one of the biggest challenges faced by retailers during a big promotional event and volumes traded in any one channel during a peak period can be perhaps five times that of a normal trading period over the year. Technology – along with distribution centres, equipment, people and resources – needs to be scalable to manage such peaks at the same time as being able to manage indeterminable future annual growth rates and help the organisation adapt to meet future business requirements.

Apart from the issue of product volumes that need to be processed, scalability also means having a system that is capable of being integrated with other systems. A Warehouse Management System (WMS) for example needs to work with the majority of ERPs so not just the one that is being used today but also the one that the business might adopt in two years’ time. Scalability in this case could also mean making sure the business operates with a WMS that supports integration to all varieties of RF technology, voice recognition technology, the major of materials handling equipment (MHE) and the Warehouse Control Systems (WCS) that drive them, etc. The best indicator of future scalability though is whether a particular supply chain system is built around an open architecture, which if it is, makes it much more likely that the system can work with other technologies, applications and operating systems in the future.

The key to managing peaks in demand, whether they come about from seasonal events such Christmas or from one-off events like big sports events, is having a true demand-driven supply chain. This type of nimble and agile supply chain has always been the Holy Grail of operations managers around the world however recent advances in technology mean that that true demand driven supply chains are finally becoming a reality.

Steve Smith, Senior Vice President at Manhattan Associates