Omnichannel: The sales and business strategy of meeting the customer in their preferred place of purchase. Simple, straightforward, and an absolute challenge for all aspects of a company. This is no different in forecasting and planning. There are now more voices in the meetings. There are now more differing needs. Now, we have more chaos in a process that already lacked precision.
Here are the lessons my company and I have learned while implementing an omnichannel sales strategy, and the impacts on forecasting and planning.
All channels needs a voice
With the primary goal of S&OP being to get everyone to the same one number for the company to work towards, a key goal is buy-in from all parties. With an omnichannel, the number of voices and signals has increased. That means the number of people to buy into the number has increased. It is just as important for a channel manager to believe and buy into their number and plan as it is the head of sales to buy into the overall number. Treating each channel manager and their signal with that level of importance helps improve the signal coming in and helps improve that key relationship. With all channels heard and respected, the aggregated number is one the key channel managers are all able to support and get behind. Any shortfalls can be discussed openly, and any big gains can be supported openly.
As Finance will be the first to tell you, all channels are not equal
However, all channels are not equal
It is important that all channels buy into their channel’s plan and the overall number. But, as Finance will be the first to tell you, all channels are not equal. We started with seven channels we received demand signals from to forecast and plan. They were wholesale (including key accounts), direct to customer (DTC) e-commerce, external e-commerce (ex. Amazon), industry focused discount channel, corporate partner channel, discounted closeout channel, and international channel. All seven channels were on different margin plans, had varied products available, and ultimately had different methods of achieving the same goal: sell product. This creates the challenge of needing a hierarchy and priority further down the supply chain. But it also drives a need to focus efforts on cleaning up a demand signal for supply planning and proposed purchasing. Otherwise, there will be product planned and supplied that was never meant for a healthy margin. This can create tension with Finance and hamper future supply planning and purchasing conversations.
We end up with three channels as our primary breadwinners and four channels supporting the business
It comes down to balance and communications
As the process continued to evolve, the big lesson learned was the importance of balancing the channels’ inputs and signals correctly. Wholesale business is the biggest volume and revenue in the company but does not represent the revenue and profits the DTC channel does. While we focus on units in planning, Finance will be sure to let you know they want the 50% to 60% margin coming from DTC over the 25% to 35% margin coming from other channels. But Finance also wants the velocity of wholesale, as it creates the bulk of the revenue. Marketing knows it influences DTC the most, but it also drives business to the external e-commerce channel. We end up with three channels as our primary breadwinners and four channels supporting the business. The business in the four support channels must augment the primary three channels, or it needs to solve inventory and distressed issues without damaging the primary three channels.
Forecasting and Planning learned that all aggregations must be dis-aggregated and reviewed
In the end, disaggregate and review
With these lessons learned and the challenges faced, forecasting and planning learned that all aggregations must be dis-aggregated and reviewed. Products have been purchased that were only signaled in the closeout channels. Products were under purchased because of support channels under signaling and then taking inventory from the primary channels. Products have been over-purchased because of too strong a signal in the support channels. The lesson is to review the signals at the channel level and flag any anomalies between the primary and support channels. If the industry influencer channel is signaling high on a product and wholesale isn’t, there needs to be a manual review and meetings had with channel managers regarding the gap. If the closeout channel is going on a run of product to close out but it’s still selling strong on the external e-commerce sites, then prioritization needs to happen to achieve higher revenue and margin to keep the product flowing in the primary channel. This level of review smooths out the forecasting, improves the deliverable to supply planning and purchasing, addresses potential channel conflicts during planning instead of during selling, and adjusts the plan for fewer gaps and pitfalls.
In conclusion, omnichannel business strategies are a key focus for all retail goods-based businesses going forward. Customers are smarter, savvier, and have more options than ever before. Businesses have to go to the customers now, not sit back and wait for them. So be prepared for new challenges and new ways to manage, forecast, and plan the business.
Join us at IBF’s Predictive Business Analytics, Forecasting & Planning Conference in New Orleans from May 6-8, 2019 and learn how to successfully navigate the omnichannel era with machine learning, data science, predictive analytics, and up-to-date S&OP from industry leaders from Fortune 500 giants and innovative disruptors. Held at Harrah’s hotel, it is 2/3 days of world-leading insight and networking.