Inventory Planning: Learning to Love Your Inventory Plan
Retailers have a paradoxical love-hate relationship with their peak season. For most, peak volumes coincide with fourth quarter holiday shopping, when it's not uncommon for 80 percent of the year's orders to come in at once. Scaling a retail operation to process five times its average order capacity is no small feat. For two months of the year, many retailers nearly break their backs to accommodate the seasonal business that will help sustain them through the other ten months. If last year's fourth quarter pushed your business to the brink, now is the time to learn how to build a better inventory plan for 2011.
Forecasting Order Volume
Forecasting is the first and most crucial step in inventory planning. You'll never strike the right balance between adequate staffing and maximized resource utilization with a random estimate of peak order volumes.
How accurate was your forecast last year? Which sales and marketing channels met expectations? Learning which programs maximize revenue and profitability will inform your decisions and dramatically increase your ability to forecast and manage your peak season more effectively in 2011.
Remember that your financial and order volume forecasts for your peak season may not enjoy the one-to-one ratio they share in nonpeak times. Aggressive pricing promotions, shipping offers and other holiday incentives will likely translate to more units per order without a proportional increase in average order value. This is a fair trade-off to win seasonal business, but it may demand more order processing resources than your top-line revenue estimates indicate.
This is where the rubber meets the road for your forecasting effort. Labor accounts for up to half of the total cost associated with every order delivered. Balance becomes the name of the game for your personnel planning. Thoughtful anticipation of labor requirements can make or break the bottom line of any retail business.
With a confident order volume forecast and a realistic estimate of your workers' productivity, you should be able to approximate your staffing needs. In addition, creating an atmosphere that welcomes the peak season is something that can benefit morale and productivity during the busiest time of year. Interoffice contests or special incentives can go a long way to getting your team through the toughest time of year. A less stressful environment for your staff will only boost productivity levels.