Optimizing Your Demand Planning Strategies for the Holiday Season

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Nat Josef

Marketing Content Specialist at Extensiv

5 Min READ
Optimizing Your Demand Planning Strategies for the Holiday Season

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It might be difficult to get into the mindset of the holiday season when so many of us are dealing with soaring temperatures and finding creative ways to keep cool (have you tried the mini-USB cellphone fan?).  

But as a business leader, you know that it’s never too early to start planning for the holiday season rush. So slap on more sunscreen, send the kids out for ice cream, and get a jump on your competition by optimizing your holiday season demand planning strategies now.

Best Practices for Using Historical Data for Demand Planning

When it comes to demand planning, there are several important things to consider. Since many brands have product catalogs that range into hundreds of SKUs, it’s best to avoid a single approach for all SKUs and begin by prioritizing the SKUs that are essential to your business, including:  

  • SKUs with the best margin and highest volume of sales  
  • SKUs related to the core product (i.e. a product that other SKUs rely on for sales). An example would be Apple’s iPhone. If Apple runs out of iPhones, they aren’t going to have much luck selling cases, chargers, and screen protectors.  
  • SKUs associated with purchase agreements (e.g., honoring a commitment to a dollar amount/volume amount of product to maintain a price point)  

Once you’ve ranked your products by their priority to the business, start at the top and work your way down.  


Using Historical Sales Data to Plan for Black Friday

Let’s say you’ve done your best to capture your historical data, but you’re not sure how to utilize that data to help with your demand planning and procurement strategies for the holiday season. There are a few ways you can do this: by SKU, by looking at the competitive landscape, and from a company perspective.  

Evaluating Sales Data by SKU 

A good place to start is by vetting the data you’ve collected. Here are some questions you can ask:

  • Was the product in stock the entire sales cycle in the historical data?  
  • Was it priced in a similar fashion as it will be this year?  
  • Was the product sold through identical sales channels?  

Evaluating Sales Data by Looking at the Competitive Landscape

Next up, look at what’s going on in the industry at large:  

  • What does the competitive landscape look like compared to the historical data? Is there more competition this year? Less? Has it stayed the same?
    • Example: iRobot practically owned the robotic vacuum market in 2014, but by 2016 there were over 20 companies offering robotic vacuums, marking a giant increase in competition for iRobot.  
  • Has the demand for your product stayed the same from a micro perspective or has it increased or decreased?
    • Example: the demand for hand sanitizer we saw in 2020 has dropped significantly over the past couple of years  
  • Has demand stayed the same, increased, or decreased from a macro level
    • Example: national spending is down due to inflation  

Evaluating Sales from a Company Perspective

Factor in historical data specific to your business:  

  • Has there been a steady percentage growth for Black Friday over the years?  
  • Have your holiday-related marketing efforts impacted sales?  
  • Has your customer count increased or decreased year over year? 

Pro Tip: Use Extensiv Market Insights
If you want to keep your finger on the pulse of order volume trends, Extensiv offers weekly updates for industry leading marketplaces and shopping carts. Visit Market Insights to drill into year-over-year and week-over-week average order volume by merchant data on Amazon, Shopify, and more.    


The Best Systems for Collecting Historical Data

Ecommerce Order Sources – Shopify, WooCommerce, etc.

Shopify provides detailed reports on sales, inventory, and marketing you can use to track your sales amounts and order trends. Depending on your subscription plan, you can download reports for sales finance, sales over time, average inventory sold per day, and sales attributed to marketing. They also offer an analytics page where you can see how your business is performing across your sales channels.

WooCommerce offers sales forecasting and automatic inventory replenishment through Inventoro. Other top ecommerce platforms like Magneto and BigCommerce have these features as well.  

Throughput Data and Inventory Valuation Tools

One of the biggest obstacles brands face is making data-informed decisions, so many use Enterprise Resource Planning (ERP), which integrates ecommerce systems and cloud-based solutions. While there are newer, more modern solutions than the ERP, many brands still use ERP. If you are, make sure it comes with two main features: throughput data and inventory valuation.

Throughput Data

Throughput is the speed at which a warehouse can perform queries. If you are looking to effectively plan inventory levels, replenishment, and potential labor resources, accurate throughput estimations are a critical performance metric.

Inventory Valuation

Inventory is everything—and determining its financial value is integral to a successful procurement strategy. For example, if you sell Baby Yoda plushes and have 50 left over at the end of the quarter, this tool can help determine the dollar value of the Baby Yodas to factor into your financial statements.  

Software Integrations

Bill Gates once referred to software as a “great combination between artistry and engineering.” That was in 1998, and though he didn’t exactly roll out a masterpiece with Windows Me (Millennium Edition) in 2000, there is a lot of truth in his summation.

Additional integrations augment the power of demand planning software by diversifying the sources of historical data. But it’s not just about pulling in as much data as possible. Rather, integrations offer specialized data gleaned from other facets of your business to enrich and deepen the data pool itself.  

Here are some software integrations that combine both artistry and engineering to provide tailored, germane data for your demand forecasting.

Marketing Software

Helpful Marketing Data Points

  • Customer acquisition costs (CAC), lifetime value (LTV) and returns on investments (ROIs)

How This Data Helps with Demand Planning

  • Centralizes your advertising data and accurately attributes customer purchases to your specific marketing channels (e.g., Facebook Ads, Google AdWords, social media, Shopify) so you can supercharge your ROIs
  • You can leverage real-time data on recent purchases and email history, and use segmentation to identify your target audience and what they need

Common Marketing Software Integrations 

  • TripleWhale, Northbeam, Yotpo, and Klaviyo

Pro Tip: Factor in Key Considerations
Remember to factor in key considerations before investing in software; for example, ask yourself if you have the budget to implement these systems and the resources to ensure you get the data you need.

Financial Software

Helpful Financial Data Points

  • Changes in historical purchase prices, margins, item levels, cash positions, and cash flow metrics

How This Data Helps with Demand Planning

  • Determines cash positions, inventory value, increased/decreased purchase prices, and other factors to help you decide what products to buy, when to buy them, and how many to buy
  • Helps companies avoid carrying too much inventory, which can lead to dollars wasted on expedited or emergency shipments, and unplanned replenishment

Common Financial Software Integrations

  • Quickbooks, Xero, NetSuite

Pro Tip: Identify Your Pain Points: Tools like multi-currency accounting and adding multiple online payment options sound awesome but be sure to identify your specific pain points before investing in tools that your business doesn't really need. For example, it's probably not a good idea to set up autopay on all your accounts if you're a smaller brand with irregular or seasonal cash flows.

The Best Systems for Automating the Purchasing Process

While you can't automate the entire purchasing process to a degree that it runs on its own (wouldn't that be nice?), you can use supplemental automating systems to dictate purchasing. This doesn't directly lead to auto purchase order (PO) creation or auto-reorder, but using these systems will automate the process of demand planning and procurement. Here are a couple of options you can look into:

Using Automation Features with an Order Management System (OMS)

Purchase Order Automation

An order management system (OMS) like Extensiv's Order Manager (formerly Skubana) has a PO creation tool that automates the reconciliation of POs with inventory inside of Extensiv Order Manager. It also automatically issues POs based on current sales velocity, lead time, and seasonality. These tools "learn" from your inventory replenishment patterns and offer insights into your data.

Profit and Loss (P/L) Forecasting

From an accounting standpoint, some OMS software integrations can forecast (P/L) and cash flow based on current and historical data. Again, this isn't full automation—what is automated is the process of determining whether you can make those new purchases based on current and future cash positions.


Conclusion

Demand planning is a strategy—not a perfect science. After all, it’s impossible to predict the future and if you could, you would probably focus on acquiring the products that are destined to be best sellers (or leave it all behind after winning the Mega Millions lottery).

Demand planning collates statistically relevant, historical data to help your business predict trends and portend possibilities, so until you hit the jackpot, it's the only option to bring some method to the madness of peak-season holiday shopping.

For tips and strategies on using automation, read the Fulfillment Automation Guide: How to Keep Pace with the Speed of Ecommerce and Customer Expectations.

If you are interested in making your order fulfillment seamless and easy, schedule a demo today!

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