Effective inventory planning enables rapid response to the change needs of customers with the distribution capabilities of a retail organization. For small retailers operating 1-2 retail stores, this process is simple enough to be conducted using excel sheets and rudimentary demand forecasting methods. Nevertheless, the scene shifts dramatically in the case of large retailers operating hundreds of stores and thousands of SKUs. Demand has to be predicted at every store and warehouse level with a myriad of factors affecting demand and inventory planning.

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Accurate Demand Sensing ‍

Retailers need a reliable system that can accurately predict the demand at a SKU + Category + Store + Warehouse level derived from its individual trends, seasonal patterns, pricing, and holiday effects. It is important for the businesses that deal with perishables, fast-moving, and high-demand SKUs to maintain a balance between stock-outs and excess inventory. Demand Sensing reduces demand latency and includes daily sales data to gain insights and improve serviceability. It also gives demand planners the capability to right-size their SKU inventory by incorporating promotional campaign data, and price changes based on price elasticity, seasonality, and weather.

Fountain9’s predictive inventory planning product- Kronoscope, is an extremely capable, cost-effective, and reliable solution for accurate Demand Sensing.

Factoring Promotions and Demand Drivers

An essential approach to maintaining relevancy and competitive advantage- Price changes and promotional events can become the stuff of nightmares for demand planners like you. Marketers design promotions to reduce food wastage and pursue higher sales figures by employing various price manipulations, promotional strategies, and events. Predicting demand for a complex process such as this, when done manually will lead to inefficiencies and out-of-stock losses. 

Kronoscope’s bottoms-up approach toward demand sensing helps it quickly adjust to changes in demand drivers. It provides insights on a granular scale, and once the historical event data and future promotions calendar is captured into Kronoscope, demand planners get a promotional uplift chart that showcases a baseline and forecasted demand for a particular SKU for an upcoming event.

Assessing Optimal Service Levels‍

Every retail company has to manage its inventory costs. The most common way is to set the desired inventory level and then buy constantly more of a product as it becomes close to being out of stock. This process, if not done efficiently, it leads to locked up working capital by overstocking certain products. Optimizing service levels can help solve this problem. Managers should identify the SKUs that bring in the majority of sales revenue and ensure high service levels so they never miss out on sales opportunities for products that are in high demand to ensure earnings.  

‍‍Kronoscope allows demand planners to maintain adequate service levels by classifying the entire SKU group into ABC classifications. Class A products bring in the majority of the revenue and 95% of service levels are maintained for them. In Class B the service level suggested by the system is 80%-90% and for class C service level is 75%-80%.

‍Dynamic Safety Levels‍

Retail businesses need to maintain a high inventory turnover ratio and thus need to plan their safety stock more to avoid wastage. They need to build a dynamic safety levels plan by assessing lead times, fill rates, shelf life, current inventory levels, open orders, and current safety stock levels. Dynamic safety levels should be assigned based on the demand variability and service level. High dynamic safety levels for high-selling products with high demand variability should be maintained and optimizing service levels is a very efficient way of avoiding overstocking inventory and service levels.

‍‍Kronoscope with its dynamic demand sensing and inventory planning capability, allows companies to maintain flexibility in safety levels to manage cash flows and working capital.

Replenishment lead times‍

Replenishment lead time is the lead time between the higher-level node to the lower-level node. Retail companies should focus on reducing the lead times as much as possible. Inventory is required for demand variability, lead time variability, and service levels but lower inventory or days on-hand is a key to a resilient and responsive supply chain.

‍‍Kronoscope helps businesses to plan their replenishment and procurement processes accurately by factoring in supplier lead time, service levels, and offset and replenishment durations.

‍Accurate Inventory Pile-Up Prediction

In a world where the demand for products is constantly fluctuating, and the supply of raw materials also changes, precise prediction of inventory pile-ups can help avoid wasted production time, unnecessary expenses, and opportunity costs. The cost of carrying this excess inventory also results in lost opportunities to invest in other operational and marketing initiatives. 

‍‍Kronoscope helps businesses optimize their working capital and reduce the complexity of managing multiple inventories. It allows managers to identify the products likely to sell out and inventory levels in advance. 

‍Upfront Stock-out Alerts

Stock-out is a complex phenomenon that proves to be very challenging to tackle, especially through manual intervention alone. All businesses need a steady flow of inventory to keep their customers satisfied. Yet, there are times when inventory runs out unexpectedly, contrary to demand predicted, with little warning, leading to lost sales and costly reordering. Businesses to counter this problem, maintain a safety threshold of inventory levels. 

‍Kronoscope can help businesses optimize their working capital by accurately predicting stock-outs and suggesting appropriate safety threshold levels.

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Contact us for all your retail inventory planning woes.