The ability to accurately predict demand is crucial in ensuring products are in the right place, in the right quantity, and at the right time to satisfy customer needs. Not only does this meet customer expectations, but it also ensures that companies are investing in the right products that they know customers want to buy and are buying these in the right quantities, improving stock management. This helps the retailer to become more profitable. Whilst the cost-of-living crisis continues to permeate and worldwide conflicts remain amongst other factors, demand forecasting is increasingly complex to manage.
The customer shopping journey is more complex than ever before; omnichannel retailing allows customers to buy and receive products when and where they want through both in-store and digital means. Customers have higher expectations; they want their chosen product as soon as possible. Retailers need to navigate this complex environment, ensuring they have stock in the right stores but also enough to fulfil orders which customers want delivered to a place of their choice (whether that be in-store or to their home). With an abundance of retailers to choose from, if customers’ needs can’t be met by one retailer, they are likely to turn to competitors, underlining, how critical effective stock management is.
Insights from NRF: Retail's Big Trade Show
Thought Provoking Consulting recently attended the NRF 2024: retail’s big trade show in New York. Two big takeaways that were on the top of everyone’s minds were stock management as well as the importance of generative AI. This signals a pivotal moment where retailers are embracing innovative solutions to optimise their operations. Better demand forecasting can enable retailers to buy the right quantities to satisfy demand, helping to manage inventory better and alleviate problems such as excess stock which impacts profitability. Markdown at the end of the season impacts the profit of a company but by improving forecasting from the start of the season, companies can manage inventory earlier in the process, minimising the amount of stock that goes into markdown and profitability.
Retailers are moving away from manual Excel-based planning methods and are looking to intelligent software to improve the process. TPC has supported many large retailers worldwide with this transformation. Many of these systems offer machine learning capabilities which can further enhance the planning process. Generative AI can help create demand forecasts that go beyond traditional models and incorporate a range of intricate details about factors that can affect demand. It involves using machine learning algorithms and data analytics to understand past purchasing patterns including analysing customer behaviour and market trends to derive future forecasts. Of course, AI is here to aid humans, not replace them, and retailers must utilise both AI as well as human knowledge to create the most robust demand forecasts.
Meeting the frequency challenge in forecasting
With demand more volatile than ever, forecasting is required more frequently. Increasing pressure on trading economics means these forecasts need to be more accurate if the market’s increased volatility is not to adversely impact profitability.
TPC is navigating these challenges. Our commitment to refining demand forecasting strategies, harnessing the power of generative AI, and championing a collaborative human-AI partnership ensures that retailers can not only meet but exceed the expectations of today's dynamic consumer base. We are experts in retail, having experience both in industry as well as consulting. Helping you to stay competitive with enhanced retail profitability and through advanced demand forecasting. Our approach goes beyond implementing sophisticated software solutions; we cultivate a strategic partnership with our clients. Please get in touch if you would like to know more.