Demand planning is a supply chain management process brands can implement to help predict what products consumers will purchase in the future. Instead of relying on crystal balls or crossed fingers and toes, successful demand planning incorporates data from historical sales and buying patterns to make sales predictions.
The insights gleaned from this data are critical for businesses that want to find that fragile balance of having enough products to meet demand, but not so much that they end up with items nobody is asking for.
Why Is Demand Planning Important?
Whether your brand is selling items through one channel or many channels, forecasting strategies are a crucial component in running a successful, profitable business. Prior to 2020, managers could simply examine their order trends from previous months or years and use that data to make a decent projection about what they should stock and sell in the upcoming months or years.
But the pandemic exposed a harsh truth—standard demand forecasting methods are not enough anymore and it’s becoming increasingly difficult to juggle all the factors needed to acquire accurate and useful data.
Predictions to Consider for Holiday/Peak Season 2022 Planning
The 2021 holiday season had the highest retail growth in more than 20 years, mostly due to the reopening of brick-and-mortar stores and a surge in ecommerce sales. Low unemployment, rising wages, and government stimulus also bolstered growth since many Americans had extra money to spend on holiday gifts.
According to think tanks like Insider Intelligence forecasts are predicting that the 2022 holiday season will also be successful because of healthy spending by consumers and stability in the supply chain. But these predictions of solid sales come with a snag—namely, that the ecommerce landscape has profoundly and irreversibly changed. Businesses must be ready to adapt to what Insider Intelligence is calling “a fundamental realignment of the shopping season.”
Typically, brands have sold the most during the “Cyber Five,” the concentrated five-day shopping period from Thanksgiving to Cyber Monday, but experts are predicting a longer, flatter holiday season in 2022 since consumers are in the process of reevaluating when and where to shop to find the best deals. For example, there was a proliferation of major retailers (i.e., Best Buy, Macys, Dell, Kohl’s, and Nordstrom) who offered massive “Black Friday in July” discounts to consumers looking to score holiday presents a full five months before the traditional Black Friday period officially begins.
With high inflation, brands are nervously making demand predictions. Numerator, a market research firm, conducted a study of Amazon Prime Day 2022 (July 12–13, 2022) and examined purchase behavior. Their Amazon Prime Day 2022 Recap Report referenced more households are shopping and spending more and sale prices influenced purchasing behavior, but some consumers passed on great deals that were not considered a necessity.
Tools You Can Use:
Extensiv Market Insights
To help brands keep their fingers on the pulse of order volume trends, Extensiv offers weekly updates for industry-leading marketplaces. Visit Market Insights to drill into year-over-year and week-over-week average order volume by merchant data on Amazon, Shopify, and more.
Inventory Forecasting Software
A handy tool brands can use for year-round demand planning is inventory forecasting software. Leveraging forecasting software helps your company manage stock efficiently so you can save money and meet customer demand. Inventory forecasting software offers several useful tools through predictive analytics to help brands optimize replenishment processes, streamline inventory control, and reduce stock levels and warehousing fees while keeping enough inventory on hand to meet demand.
Inventory Optimization to Drive Growth
The right inventory optimization tools help brands address fluctuating order volumes, offer a clear view into inventory counts, determine potential risks, and reduce expenses. Real-time inventory tracking data can identify what’s selling (and what’s not) and ascertain if your warehouse is ideally suited for your business’s order fulfillment process. Brands can use this data to increase working capital by reducing overhead. These profits can then be reinvested into the company to use wherever extra capital is needed. If you’re not sure where to start, check out our Inventory Optimization Guide.
Automated Order Management System
An order management system (OMS) is a software solution designed to track sales, customer orders, inventory levels, and order fulfillment through efficient and cost-effective processes. Modern OMS software is truly multi-dimensional and impacts nearly every aspect of the ecommerce landscape—from sales channels and order status to warehousing workflow and product lifecycle throughout the supply chain. An OMS includes features like automated replenishments, order orchestration rules, and demand planning/forecasting—which analyzes inventory lead times, sell through, and current stock and recommends the ideal time for ordering inventory.
Inventory Strategy for Amazon
In early 2022, Skubana, an Extensiv company, teamed up with Tinuiti and some of the leading marketplace experts for a two-day virtual conference to offer ideas on how to successfully forecast on Amazon. In one of the sessions, experts recommended brands forecast their inventory needs a year in advance for each channel, reserve inventory for Amazon-only sales, review sales velocity quarterly (or more often if warranted), and promote and/or re-price stagnant inventory. The panel also offered insight into metrics like traffic, seasonality, sales performance, and drop shipping.
Exploring automated inventory management systems and automated Amazon PPC can benefit businesses as well. Amazon FBA Inventory Management can help brands control inventory by offering advice on how to liquidate or remove Amazon inventory. All in all, partnering with Amazon can single handedly increase your sales. For more information, check out our webinar: Why Accurate Inventory Data Is Crucial for Holiday Sales.
A Caveat…
While these tools are incredibly useful, it’s unwise to just assume Amazon’s solutions—like Prime Day or Black Friday—are the answer for all brands. For example, during Prime Day, Amazon dictates that all products offered at a discount must be eligible for Prime shipping in all U.S. regions, meaning each product a brand sells must be stored in at least six different Amazon warehouses. Further, sellers have no control over where their inventory is stored or how much they can send to Amazon’s warehouse.
These limitations—combined with the seller rating, product rating, and mandatory 20% discount—can limit the payoffs for 3rd party sellers and smaller brands. While overall sales increase on Prime Day, the vast amount of the profits go to Amazon itself. In case you are interested, the top five items purchased during this year’s event were: Fire TV Sticks, Echo Dot 4th Gens, Blink Cameras and Doorbells, Amazon Gift Card Reloads, and Ring Video Doorbells. The 6th most popular item? Frito-Lay Variety Packs. The rest of the top ten most popular items were all from major brands who partnered with Amazon to promote their products.
All in all, Amazon's product lines accounted for 68% of all Prime Day sales in 2022, while marketplace sellers made up only 32% of total sales. So, while Amazon marketplace retailers did experience some growth over their 2021 sales, it was more of a footnote than something to write home about. The bottom line is that Amazon is looking out for Amazon, so brands need to look out for themselves.
Conclusion
For a successful peak season, brands need access to data—your own historical data and insights from the industry—to successfully plan. As part of this strategy, you need to strategize and plan for issues that may arise from inventory, staffing, shipping, shortages, production costs, and capacity constraints. Tools that automatically track or automate inventory and order management can help you save time and increase profitability and accuracy. Huddle up with your team, chart your plan, and set up contingencies now while you still have some breathing room.
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For tips and strategies on automation, read the Fulfillment Automation Guide: How to Keep Pace with the Speed of Ecommerce and Customer Expectations.
