In today’s COVID-19 landscape, companies are expected to predict future revenue, prevent risks, and react to opportunities quickly in order to drive profitability.
As such, they need a reliable way to ensure projections align with revenue and real-time market conditions. That’s why forecasting is a necessity for retailers as it enables them to ensure they have enough inventory available to satisfy consumer demand.
Below I will explain four important considerations needed to improve the accuracy of your forecasting.
Historical Sales Trends
It may seem obvious, but historical sell-through (or point-of-sale data) on how products or categories have performed across all channels and locations is important. Having this data captured, accessible and rolled up into a comprehensive manner is critical.
This allows businesses to pinpoint trends by location, region and channel. This comprehensive look at sales data can generate important insights on how companies plan, especially during peak seasons or holidays.
Unlike some forms of data, historical is specific to your business and utterly important when considering how you think you will do in the future. However, it’s when you pair this data with your current sales trends that you can really produce stronger insights.
Current Sales Trends
Another critical step is looking at how your business is performing currently. By layering your real-time POS data on top of your historical data, you can identify positive or negative shifts allowing you the opportunity to make needed changes in current strategies — e.g., ordering more inventory, marking down excess product, launching a promotion, moving product to different locations, etc.
More often than not, by doing this correctly, it allows you to pull in order and shipping data. This gives you the knowledge of what your open orders are as well as when product is due to arrive and if there are any delays. This information enables you to react quicker if something was to go wrong.
Market and Consumer Trends
Once you layered your historical data with your current POS performance, now is the time to be looking at datasets outside of your four walls to incorporate into your forecast.
Leveraging big data, companies can be incredibly useful to track where consumers are heading. Furthermore, social data can help anticipate emerging demands for new products or styles that not only impact your sales forecast, but can inform what products you need to source to capitalize on trends.
One of the most overlooked factors lies in the power of the very suppliers and brands you rely on. After all, they're experts in their products and can share trends happening across their business. Unlike consumer or market data, suppliers can provide truth on how products are performing elsewhere right now.
A recent study revealed that retailers and suppliers leveraging data-sharing strategies saw 66 percent faster growth rates, 55 percent higher gross margin return on inventory, and 12 percent higher sell-through rates.
Attaining supplier insights isn’t always as simple as asking, however. It often requires empowering them with what’s selling in your business so that they can help uncover new selling opportunities, pinpoint potential out-of-stock positions, or strategize on moving through excess inventory.
Sharing data doesn’t just bolster your sales forecasting efforts with better data points, it also enables your suppliers to improve how they conduct forecasting and planning in their business. As a result, they're better equipped to support your future demands.
Dave Pesce is a strategic product specialist at SPS Commerce, a leader in cloud-based supply chain management solutions.