The Frozen Forecast

As we start to creep into February and begin to see the roll in of new products onto your retail shelves, you may want to do something a bit different this year. This week’s edition of HOW PREDICTABLE talks about the benefits of freezing your replenishment forecast to your PLAN numbers early on in your replenishment cycle to maintain your position before sales peak.

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Wide Open Spaces

Canada is a large, geographically diverse landscape, and America being even more so. Our west coast in Canada sees spring in early March, while some northern communities only see the melt in May. Minnesota is in the grips of winter until April, yet Louisiana barely sees and freezing temperatures. This means that you can expect to see a much earlier uptake on your seasonal merchandise in these warmer locales than in your cooler ones; yet it does not mean that you will sell MORE in the early bird stores, merely earlier.

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Who’s Contributing to The Total

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In the early days of your seasonal items, you have probably learned that starting your REPLENISHMENT cycle at any location on the FIRST POSITIVE SALE is a wise choice. This prevents any deterioration of your initial forecast before the goods are set up to sell. Once you get a positive sale, you can start your weekly/monthly updating. This means that early on, you get your warm weather stores starting to contribute most of the sales, while your large colder stores have yet to fire fully, they may be updating with low sales numbers.

This sales contribution imbalance may start to skew your forecast in favour of the early store, at the determent of the stores who are going to need that forecast later to drive its forthcoming sales plan. This may set off a deployment of scarce or short inventory to stores that may end up seeing it marked down, as opposed to stores who could have sold it during the peak.

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Let’s Wait and See

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Knowing that you have put some thought and care into your initial store plans, you now likely want to let the season unfold a bit before reacting. Early reads are exciting and may indicate you have a winner, but it may simply be the stores that have unseasonably warm temperatures this year driving it. A prudent approach is to manage the updates in your forecasting algorithms to be less reactive, but that comes with a bit of trial and error in the smoothing constant. A more precise means may be simply to halt all forecasts on items until you are sure all stores have had a positive sale, allow a set period to elapse, or set a tolerance of 20 to 25% sell-through before you engage in any ACTIVE replenishment. This lets the dust settle on any early weather reads and allows true national or regional demands to play out over the course of the entire season.

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It's Playing the Long Game

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Early sales are tempting to chase, but remember you are setting your forecasts for the entire season and do not want the early volatility to hurt your reserve supply. Placing a higher percentage of their seasonal total into early launch store’s initial quantities help mitigate the risk of losing that early momentum, while maintaining future stocks for larger stores. Seasonal forecasts take some courage as well as patience, and holding your cards in March for a future win in June may be the best strategy you can deploy this spring.