Developing an accurate planning forecast is an extremely important piece of the planning cycle for a retailer. It’s also a difficult and complex component to get right. Planning forecast accuracy is part art, part science, it requires a deep understanding of your customers, their buying habits, and the effects of seasonality.
Fortunately, it’s a lot easier when you have the right enabling technologies in place. Here are three major considerations as retailers go through the planning and forecasting cycle.
Depth of Planning Capability
Most retailers can plan by product line, location, and category without much issue. But do you have the historical data to plan to a lower level than that? Do you have access to prior year data and trends at the individual SKU level? What about by different sizes, color, or material?
Newer planning technologies are allowing retailers to access data at levels that were previously impossible to see. It’s having a major impact on improving the analysis they are able to perform, leading to greatly improved planning accuracy.
Bottom Line Profitability
Planning by total sales dollars is fairly simple. But what about planning at a gross margin level? We recently worked with one retailer in the upscale men’s fashion industry segment who was aiming for an overall increase of several percentage points for their average gross margin for all products sold. After implementing one of our analytics solutions, they discovered their promotions for several types of hats and accessories were below this gross margin threshold, bringing their average gross margin percent lower. After they discovered this, they were able to modify their promotions to hit their annual targets.
Their promotions were not aligning with the overall company goals. This depth of analysis is very difficult to see when you’re only using excel.
Availability of Data for Planning Forecast Accuracy
When it’s time to start the planning process, how long does it take you to get access to the data you need? Can you pull it yourself or are you waiting on IT? And, are you sure the data is accurate?
Having self-service reporting from a system with a single source of the truth helps alleviate all of these planning forecast accuracy concerns, so you aren’t rushing to get your forecasts completed at the last minute.
Clearly, retailers face a number of challenges that make it difficult to accurately plan and forecast. Fortunately, there are a number of tools available to help simplify and streamline this process.