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Best in Class Strategies for Battling Uncertainty in the Holiday Supply Chain

It’s no secret that 2020 has brought unprecedented change and headwinds to the world of retail, and inventory management is one of the critical success factors facing the most ongoing uncertainty.  From runs on toilet paper and household items in the spring to stocking back-to-school apparel to suit an unusual back to school season this fall, the challenges and discrepancies in demand planning continue to impact nearly every retail vertical. As we head into the Holiday Season and kicking off with planning First Quarter demand, the imperative to manage extreme uncertainty in demand is a clear priority.

Complex Demand Fluctuations Meet Retail Supply Headwinds

While many retail segments are managing to post gains driven by pandemic-related increased demand in specific segments (think: athleisure, fitness equipment, home office supplies, etc.), retailers are simultaneously being met with novel supply-side challenges, constraints, and backorders.  Many categories of merchandise have fallen under manufacturing pressure due to uneven demand spikes, shutdown-related closures, and the health, safety and productivity of the workforce. The question facing merchant inventory teams is when and where to stock the shelves with product and what inventory management techniques will deliver the most success for meeting uneven demand across channels. There’s also the need to act upon the evolving ways the consumer wants to shop (whether ordered online and fulfilled with delivery, online with pickup or in-store, etc.), which adds to the complexity of where to place the inventory to optimize margin and sell through.

The answer lies in implementing system-wide changes in inventory management procedures designed to optimize sales and profit in the face of extreme departures from historical norms.

Retailers Must Create New Business Rules to Meet the New Normal 

In response to uncertain times, retailers need to swiftly implement new rules appropriate for a changed business environment.

  • On the supply side, new rules must be targeted to treat constrained merchandise (e.g. sporting equipment, paper goods, electronics) differently than readily available merchandise.
  • And on the demand side, both store format variation and localized pandemic-related regulatory issues and health and safety impacts create significant challenges in planning for demand patterns that call for utmost sensitivity, flexibility, and unique inventory rules for holiday.

Merchant and Inventory Collaboration is Paramount

It is now incumbent upon merchant leadership to provide clear and ongoing direction to the inventory team through a formal Sales and Operational Process (SOP) uniting the head merchant, inventory executive and supply chain.  The establishment of a cross functional SOP committee facilitates the implementation of new business rules to deliver maximum sales while avoiding excessive markdowns when inventory is trapped in lowest-demand channels and locations.

The Time to Act is Now

At McMillianDoolittle, we are working with our clients to customize the Sales and Operational Process (SOP) and Crisis Inventory Management business rules to deliver superior results for your organization. Our tested and proprietary approach is designed to:

  1. Provide new business rules within the first week of our engagement for high value categories.
  2. Establish the formal SOP approach for the coming two seasons and refine business rules for the entire merchandise offering.
  3. Unlock positive gains on the sales and the margin lines.

To learn more about our process and to immediately leverage these learnings to positively impact your organization this season, simply contact us today. You may also refer to our list of services designed to help your business with pandemic recovery here.  Our solutions for reacting to the post-COVID world include processes to build trust with your customers, employees, and suppliers.

As always, we are here to serve you.

Fred Hajjar

Fred is a guest contributor and McMillanDoolittle affiliate partner. Fred has 30 years of experience improving retail supply chains including 15 years with Accenture’s Supply Chain Practice. His work has spanned the fashion, mass, specialty and drug industries for retailers across North America in both the physical and ecommerce space.

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