Tools for Merchandise Forecasting
Merchandise forecasting systems exist in a world unto themselves. And yet they’re basic tools that any mid-to-large-sized cataloger needs to compete successfully. Still, few catalog executives choose to make the investment in such solutions. In most cases, this reluctance is caused by two factors.
On the one hand, no one in the company may “own” the issue of making strategic inventory decisions. Merchants may make product selections, buyers decide whom to purchase from, marketers determine price points, and inventory managers must find a place to store the items or arrange for drop shipment. Yet no one takes full responsibility for determining exactly how much and when to buy each item. Merchants recommend, marketers advise, inventory managers warn and complain, and somehow everyone muddles through. Meanwhile, fill rates bounce around willy-nilly, and both backorders and overstocks become a fact of life.
On the other hand, when someone does actually try to impose order on this chaos, spreadsheets are most often the tool of choice. Why? Because they’re cheap, if not virtually free, since Microsoft’s Excel is ubiquitous. And they’re functional enough as planning tools to be considered sufficient to get the job done.
It seems that most direct commerce companies that invest in a formal merchandise forecasting system cross that bridge only when a trained merchandise professional joins the management team. Armed with knowledge of the merchandise management discipline, and experienced in its implementation, such a professional imposes order by using the appropriate tool — that is, a merchandise forecasting solution.
A Matter of Perspective
Essentially there are three views of demand forecasting: supply chain, retail and direct commerce. The latter can be divided further into two distinct groups: catalog and Web.
Most merchandise forecasting systems on the market are designed for the supply chain or retail worlds. In the supply chain environment forecasts of demand are used to plan production and distribution. At its most sophisticated, distributors and retailers work closely with manufacturers and producers in a formal, collaborative planning, forecasting and replenishment (CPFR) environment. While this holds significant promise as a future supply chain management platform, such systems are not our concern here.