Ecommerce is changing how we see Demand Planning and ushering in new rules and best practices. Traditional businesses that moved into eCommerce must deal with the friction between managing supply for online customers and Brick and Mortar (B&M) customers and be able to manage the same inventory for two different sets of customers, for which there are vastly different demand factors. At Newell Brands, we know the game has changed and we need new tactics if we want to compete.
Here are few recommendations that will give you an insight into Ecommerce Demand and Supply. Starting with Demand Plan tactics and with the misconception that “forecast is always wrong anyway”, I strongly recommend harnessing the information offered by your online customers, who are highly data-driven. Sell-in, sell-through and inventory profile information are highly valuable elements and are easy to obtain for each SKU you are managing. Let’s take a closer look at it.
Demand Plan Tactics For Ecommerce
It is important to measure the accuracy of your current Ecommerce forecast against the sell-in actual data to adapt your demand plan if necessary. This forces a more granular demand review rather than an aggregate level analysis.
Our next step is the incorporation of the sell-through performance plus the inventory profiles to adapt the best demand statistic model and the correct signals to supply. Analysis of the complete SKU business portfolio can be a massive task but doing a total ABC/XYZ pre-study and focusing in your A/X items should at least address 60% of the issues.
The combination of these three elements will increase demand plan quality by quickly identifying erroneous demand signals that can cause excess inventory issues, as well as predicting of out-of-stocks.
In a perfect world sell-through data is expected to give a one to one ratio with your sell-in demand plan interpretation, but don’t forget to look at the inventory level consumption in between.
How demand is managed for these brands depends on the sales channel.
Supply Chain Inventory Allocation
When it comes to benchmarking best practices, some organizations ringfence stock to serve key account customers until the order drops in. This brings us to the risk of severe excess issues if that key account order never comes through, plus the possibility of missed orders from non-key account customers. Also, this might require micromanagement in customer services operations and supply chain and logistics teams to control the stock.
Benefits Of Centralized Supply
A possible solution is to consolidate the online business inventory and B&M inventory into one source of supply. There is a higher probability that you will cover the other BC/YZ order segments coming from a centralized source of supply rather than fighting the demand complexity for your other levels of supply downstream. Depending on the demand levels of online customers, further benefits of maximizing availability of stock by centralized procurement are:
- pallet loads configuration opportunities
- promotions for direct loads/containers even from original vendors
- hybrid solutions for peak seasons to direct fulfil end user orders, etc.
There are lead time and transportation costs to consider and evaluate while going through the process. There are inevitable trade-offs, so make sure assess what you are gaining and risking by centralizing supply.
Bottom Line
In conclusion, the variables impacting demand differ from business to business. There is no one size fits all solution. It’s important to understand how demand for each SKU is spread across the two channels, understand which regions the demand is coming from for each channel, and a have handle on how the distribution network is setup for both. There are major challenges reconciling the two different sources of demand – the key is to know the individual demand factors and the core Supply Chain for each, treating them as distinct operations with their own demand signals and Supply Chain requirements.