Maximize sales, minimize losses this Yuletide

A successful season for many retailers this year is threatened by the continuing impact of Covid-19 on the supply chain, along with the current economic challenges such as soaring inflation, increasing price of petroleum products, and weakening consumer confidence.
Photograph by Alfonso Padilla
Photograph by Alfonso Padilla

Managing a business is based on minimizing expenses to maximize profits, and revenue is the difference between the two and the ultimate result of the two. Supply chain and retail planning platform RELEX Solutions said companies must be concerned with minimizing expenses to maximize profits by exercising creativity and exerting persistent initiatives to maximize profits and reduce costs.

Kristie Davison, vice president for Sales for Asia Pacific at RELEX Solutions, says the Christmas Season is always a business growth opportunity for many retailers due to a sure spike in consumer spending.

She said Filipinos were found to spend 331 percent of their monthly income during the holidays in 2021.

Yet, a successful season for many retailers this year is threatened by the continuing impact of Covid-19 on the supply chain, along with the current economic challenges such as soaring inflation, increasing price of petroleum products, and weakening consumer confidence.

"Similar to retailers globally, Filipino businesses also grapple with the increased supply chain challenges from both the pandemic and the ongoing conflict between Ukraine and Russia," she said.

Moreover, she stressed that consumers are equally experiencing the brunt of this situation, making the climate harsher for many enterprises.

"The most efficient way for retailers to navigate these uncertainties would be to plan how to maximize sales while minimizing loss," she suggested.

Seasonal inventory management is often complex due to advanced purchasing before the season and a high risk of the residual post-season stock.

Christmas means a high turnover of product lines from one season to the next.

"Think about how many smartphones are sold during the holidays, but the selection is always different yearly. Furthermore, brands also often launch new products that are systematically pushed throughout the -ber months as seen in 11.11 and 12.12 promotions, requiring retailers to assess demand for each," she said.

Davison stressed that these situations highlight how crucial demand forecasting is to get the right amount of stock-keeping units or SKUs and ensure a return on investment.

Unfortunately, many retailers manually forecast demand, posing high risks of inaccuracy that can lead to over or understocking.

With this, she said automating demand forecasting helps businesses achieve optimal outcomes by improving the on-shelf availability of seasonal products and reducing residual stocks when the season ends.

"A good forecasting model for seasonal planning includes a reference product that can be specified against seasonal or event-specific indices to calculate data-backed forecasts for new items.

Empowering businesses to search the historical assortment for items with similarities to those being introduced and build a forecast can potentially drive significant improvements to availability and inventory values while considerably reducing markdowns," Davison explained.

With Christmas spanning four months in the Philippines, intelligent replenishment also improves a brand's responsiveness to consumer demands.

For Davison, a good solution is to deliver only a part of the forecast demand to stores at the beginning of the season to avoid moving goods among shops.

"Once holiday shopping starts, SKUs at individual stores can be replenished through pull control based on the latest sales, store-specific forecasts, and actual inventory. This enables retailers to effectively respond to local conditions concerning external factors such as weather or a change in competition for an individual store," according to Davison.

When products are bought in advance, she stated that push control should be used toward the end of the season to ensure that seasonal products don't pile up unnoticed in the central warehouse.

An ideal management system allows allocations to be directed to the stores with the best chances of selling the products, such as those with the highest sales and no excess inventory.

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