Good Plans, Great Reactions

An underappreciated component to inventory planning excellence is careful alignment of the planning calendar to the timing of marketing activities. Easy to say, tough to do, and here's why.

Good Plans
From the outside, there's a perception that planning is about applying comprehensive analysis that results in a perfect plan. If only that were possible! As any experienced inventory planner will tell you, perfect isn't achievable. While thorough analysis will yield the "best possible" plan, that's just the beginning. Superior plans don't exist in a vacuum; when a plan can be supported by other controls and responsive systems and processes, including a well-considered planning calendar, that's excellence.

Here's an example. The chart below reflects typical forecasted demand accuracy for new products from an apparel direct retailer. It shows the average variance of planned unit demand vs. actual demand at weekly intervals, starting 12 weeks before the items will be promoted. As you can see, only marginal improvements in accuracy occur prior to the date the products are promoted to customers, but in the first week following the promotion — see the red arrow — accuracy improves dramatically.

For an inventory planner, this illustrates the importance of aligning purchase decisions with the marketing calendar. Reorder decisions made one week prior to the promotion will be considerably less accurate than reorder decisions made the week of or the week after the promotion occurs. When you consider the number of new products and their respective forecasts introduced throughout the year, the aggregate effect on the business can be staggering.

Great Reactions
That's why contingency planning is such a valuable approach. It's a holistic process which melds the timing of the promotions with any number of "if x, then y" decisions, and must involve the vendors, especially when you're dealing with long lead times and offshore suppliers. Make sure your vendors are aware of your contingency plans and poised to act on your decisions as they happen — e.g., reorders, cancellations, color or fabric adjustments, etc.