Three Keys to Mitigating Retail Uncertainties with Art and Science
Three Keys to Mitigating Retail Uncertainties with Art and Science
Doing the same thing but expecting a different result.
Now that the pandemic has reached a “stabilization” phase, retailers are trying to understand the impacts on channel sales, and inventory, as well as the retail supply chain in its current state and for the future. The definition of insanity has never been more important for retailers to avoid.
Consumers are still facing uncharted territory as much as retailers. The desire to spend is suppressed by job instability, rising inflation, and uncertainty for the future. For most retailers, while data has been captured for this environment, there remains highly questionable chance of getting forecasts right for the future without changing something.
The race for retailers to deploy omnichannel order management capabilities like buy-online-pickup-in-store (BOPIS) and buy-online-return-in-store (BORIS) has shifted to capturing and using consumer demand information in the most effective way. Despite the growing use of online commerce, business is still primarily done facing customers in the stores. Providing a safe, efficient, and reliable shopping experience has become a priority for retailers.
The way you respond in these unthinkable times will surely determine the future of your business, your employees, and your financial recovery. The idea of fundamental business transformation is both exciting and causes significant trepidation.
Retailers’ typical approach, whether using newer technology like artificial intelligence, advanced analytics, or other sophisticated software, will be more successful “blending art with science.” Here are three keys to successfully approaching your transformation:
- Use your people.
Given continuous, unprecedented disruptions, retail leadership’s call to action has never been louder. Employees who weathered the COVID-19 pandemic with you are extremely loyal and want to be a part of the solution. Additionally, your employees drive a substantial portion of the “art” in this equation. The knowledge they have of your business, assortment, and stores are crucial in solving a viable, quick and impactful solution. Your people know the systems and tools, how to fine tune them, and how to translate your company’s vision and strategy. Don’t assume anything. Communicate goals, ideas, and strategies often and clearly. If we’ve learned anything over the past couple of years, a strong company culture is absolutely critical to longevity.
2. Understand your inventory.
Having a single view of total inventory is key. Understanding precisely where your inventory is in the supply chain is crucial to proactively mitigating risks. While during the height of the pandemic likely did not represent “normal operations,” it is key to evaluate current on hands and weeks on hand across the various channels and determine how to best fulfill outages with overstocks located elsewhere when supply is constrained. Strategize incoming orders to maximize sales opportunity, but keep in mind the unknown future liability. Did some stores close or did demographics change to the extent that historical sales patterns are of little use without a fundamental change in how you forecast demand? Consideration of seasonal items and everyday basics should have a different strategy anyway, so consider changing your approach to these items. Here again is “art”—thinking differently, driving systems and strategies down a new, probably uncharted path, all along using the science to the fullest extent.
3. Predict the future.
What will consumer demand be across all your retail channels? Do you have a true unified view of demand, or are you still operating with a disparate, functional area-driven, multi-channel approach to understanding demand patterns? How will physical stores drive sales differently and interact with your online environment? How do you execute most profitably? You’ve heard the term “peanut butter” approach, and this is not the time for a one size fits all. Dig into the data, use your people and your intelligence systems to identify anomalies. Fine-tune, cleanse, and learn to trust the data. Likely unplanned strategies will have to be deployed to move through non-sellable inventory, making room for new, seasonally-correct incoming inventory. Having a plan will allow the execution of each order to be deployed through allocation and replenishment to support the strategy. Additionally, the steps you take for recovery will be instrumental in supporting the retail planning process for the years to come.
Certainly, those retailers who have already selected and implemented new technology that can help drive data into decision points will be ahead of the curve. Systems that enable sophisticated settings, like service level goals and safety stocks certainly will help. Retail forecasts that are supported by artificial intelligence (AI), and machine learning (ML) are a big part of the “science.” However, without the “art” (your people’s knowledge and forward-thinking strategy of how to approach or fine-tune results) the definition of insanity prevails.
Above all, The Parker Avery Group is here to help. If you have any questions about how to move forward in this uncertain world or just want to toss around some ideas over the phone, please reach out.
