If you’re reading this, by now you likely understand the benefits of inventory planning: accuracy in revenue, increase in profitability, and the ability to react to shifting demand.
At a time when everyone is trying to reduce expenses and protect their profits, now is the time to optimize your inventory and planning processes. Before you start implementing the steps we mentioned in our previous post, let us help you prepare for the challenges that may come.
While there are ways to improve your demand accuracy, you may still come across variables that can impact your planning. A common challenge is the use of consistent data, especially as a unified source across the business.
As brands grow, the source of information can stretch across teams. Some members may use ERP data while others use google analytics. While they themselves may be consistently using the same source, the challenge will be in unifying that source across the company. You don’t want to be in a position where you’re debating actuals, especially on days that drive significant sales.
If you’re just starting out, speak with your leadership team on establishing aligned sources of truth. If you’re at a point where various sources are already being used, try to understand the benefit of each source and establish a process of assessing and assigning singular sources for the data points you need.
Another risk in accuracy stems from the systems used. Some tech solutions may only sync with particular sources of information, which would pose a challenge to what w
e mentioned above.
If you’re in a place where you’ll be using a spreadsheet to manage your plans, the most obvious risk is that of human error. All it takes is one simple keying mistake and you can find yourself ordering millions of dollars in unnecessary inventory.
Moreover, the less obvious challenge of managing inventory in a spreadsheet is that of a changing forecasting model and methodology. As you adapt to your processes and understanding your business, you may find there are adjustments needed to the way you forecast. You might find yourself using different statistical methods or financial models as you improve over time. While this is certainly better than not adapting, the challenge here is recalling which methods were used when in order to appropriately understand shifts over time.
This is where the benefit of a planning system really shows. With Fuse, statistical methods are built into our machine learning algorithms to take the guesswork out of the science of forecasting. This leaves room to focus on the strategy and overall inventory optimization.
Adoption of processes
We mentioned the challenges faced in aligning teams with a source of truth. However, the cross-functional strains don’t end there. We’ve talked about the importance of establishing processes in a business to align decisions and strategy. While this all sounds great on paper, what someone must be tasked with is ensuring the processes get executed and that they happen on time.
While planners are notorious for their time management and excel skills, the same cannot be said for all employees. Therefore, the adoption of such processes can prove difficult without the proper measures in place.
Some steps to facilitate the adoption of processes are:
- Education on what the process is and why it exists
- Designation of responsibilities by party with an agreed upon timeline
- Alignment on communication methods (slack, email, project management tools, calendar, etc)
- Protocol for delays that will impact the timeline
- Assigned point person who ideally holds authority or leadership
- A teamwork attitude
Patience, while not necessarily a step, is also important to have. With anything new to a business, there is a window of time for trial and error. Once the steps are working seamlessly on a repeated basis, you may uncover the next challenge which is user override.
When using tools like spreadsheets, you will have to put rules in place to mitigate data override in shared documents. One common feature you can use is the lock functionality in excel. This allows edits to a shared doc on a user by user basis. It’s not the most conducive process, but it's a way to protect your files from this sort of risk.
Finally, you’re in a good place. Your data is aligned. Your processes are in sync. What else could possibly go wrong?
Similar to how different teams have different sources of data, they also can have different methodologies for forecasting sales such as those by:
- New & Repeat Customer Spend
- Location/sales reps
- New Products
- Marketing/Advertising channel
This goes back to our recommendations on aligning these inputs to create a final forecast. The challenge of course arises when there are different targets being marched towards and analysis done on. You’ll have to again establish what the best methodologies are for the business, and for your inputs.
Everyone relies on planning to stock the right inventory to sell and meet targets. But the relationship works both ways. Planning is also impacted by what actions are taking place in supply chain and marketing. It's important to have good working relationships and buttoned up processes. Expectations should be clearly outlined along with the repercussions of delays.
When in doubt, remember the old adage - team work makes the dream work.
Art vs Science
Let's take a moment to talk about the gut. Planning, like many things, follows the 80/20 rule where 80% of the forecast is based on science and data and the remaining is based on the art of planning. However, even this “art” comes from years of experience with data. So while numbers may guide you one way, your experience can add a layer of perfection to what is already there.
What is sometimes used synonymously with this art form is this idea of listening to someone’s gut. In other words, subjectivity. It will always be there as it is a force of human nature. So how do you protect yourself (and your plans for that matter) from this non-data, non-insight driven direction? The short answer is, you don’t.
Oftentimes this inkling will come from those in leadership positions. Like any opposing view, it helps to understand the why. Is it the weather? Political landscape? Noise of the market? There will always be a reason, even if it’s not singular or concrete. This is where the importance of data and communication skills come into play.
The best defense is data. What happened during the last “why”? Do you know? If not, find out. See if there are patterns in other’s hypotheses. If for nothing else, for your own curiosity. Being armed with facts and insights will help position you as a source of knowledge and over time, authority.
In the meantime, know the data. Be aware of the opinions. And if push comes to shove, have a plan for pivoting.
We spoke earlier about the challenges of acclimating to programs like excel. The same holds true for systems. This is why usability is so important when sourcing new systems. If you want people to follow processes, they should be as easy and pleasant as possible.
Even with easy to use tools, you may be wondering if the costs are worth it, as they themselves can be seen as a challenge. This is where we would advocate for finding solutions that don’t charge per user or the number of products you have as these are not indications of revenue and therefore do not equate directly to a cost:benefit ratio.
Look for tools that show value as you grow such as a decreasing cost per order. And more importantly, consider what value the tools bring to your team. Will you need a designated person to manage the system? In which case the “cost” of the solution can very easily double.
When looking for planning tools, keep in mind the average salary for an advanced planner is upwards of $100k depending on your market. If a system can reduce your headcount at a lower cost, then it makes sense to invest early on as the benefit will only amplify over time.