Today we are sharing two articles related to planning in Retail. Both show how retailers in Europe and the USA are increasing their inventories for various reasons. I will summarize the main points and some recommendations.
https://www.wsj.com/articles/inventory-pileup-uneasy-shoppers-put-retailers-in-jeopardy-11661690106 – This article tells us how retailers in the United States are projecting to close the year with high levels of inventories and lower results, as they are seeing an impact on users’ purchasing power due to inflation.
https://www.modaes.com/empresa/los-gigantes-de-la-moda-se-blindan-de-inventario-acumulan-un-35-mas-de-stock-que-en-2021 – This article also reports a significant increase in the level of inventory of retailers, but emphasizes two points: one, the change in consumption patterns of customers, and two, the increase in security levels to prevent disruption of supply chains.
Both articles project ending with high inventory levels compared to Christmas 2021, when stores had a large number of stockouts and shortages. We are seeing the bullwhip effect in all its glory, going from being sold out one year to having excesses the next, and this time, the cash flow will take the worst hit.
What do we at WA Solutions SAS recommend to mitigate this situation:
- Reduce supply lead times – American retailers are looking for closer suppliers as much as they can. Apparel companies must be obsessed with shortening their design, production, and delivery cycles. In many cases, the cycle from the first sketch to being on the hanger can take 120 days or even more. Today, shortening this time is vital to deliver a product that is closer to the needs of the market. I invite you to review the concept of strategic positioning in this article https://wasolutions.co/es/que-es-ddmrp/
- Have an efficient portfolio. Today more than ever, investing in a profitable portfolio is vital to guarantee the ROI of your business. Be relentless with renunciations; today is not the time to give an opportunity to a product that was born dead. I invite you to take a look at this TED video The paradox of choice | Barry Schwartz
- Work with REAL demand as much as possible. We must understand that planning horizons lead us to work with the forecast to be able to buy inputs, raw materials, and products; the forecast also helps us to generate manufacturing orders and to fill channels and stores, but try to replenish by reading REAL demand.
- Use dynamic inventory policies that take into account the variability of demand and supply, reorder minimums, desired frequencies, and decoupling points. A traditional coverage model can be made more flexible using these parameters, but we particularly recommend #DDMRP.
- Read the demand in different time horizons to understand changes in consumption patterns and make adjustments quickly in the farthest links of the chain. At this point, analytics plays a very important role.
- Understand that every perfect plan is a waste of time, and in a moment of uncertainty, change is the only certainty… so learn to adapt quickly.
From WA Solutions SAS we can help you plan your supply chain in these Volatile, Uncertain, Complex, and Ambiguous times. – Visit our page where you will find more about our products and consulting schemes.
