Tackling Inventory Planning Challenges For D2C Brands

Throughout the last decade, the balance of power had shifted considerably toward the consumer with the rise of social media, e-commerce, and other e-services. Additionally, the Covid-19 pandemic accelerated the shift toward digital in a profound shift towards digital channels. As per a?Mckinsey?report, 60-70% of consumers today are shopping the omnichannel way, with social media being the new window to shopping.

To this effect, CPG brands have been seeking to establish direct and tangible relations with their consumers. Building a direct-to-customer model helps CPG brands to maintain customer experience throughout the customer journey, gain additional insights on the consumer and create brand loyalty. Evidently, a growing number of new-age D2C companies like Harry's and Bonobos in the USA and?Mama Earth?and Epigamia in India have emerged in the market and are doing really well.

The idea of D2C being a high engagement business model itself creates a plethora of challenges in supply chain and inventory planning. According to the same study conducted by McKinsey, over 60% of consumers faced out-of-stock during the pandemic, yet only 13% of the consumers waited for the products to be back in stock to make a purchase.?

D2C brands can not depend only on brand loyalty alone and have to take concrete steps to strengthen their S&OP, demand prediction capabilities, and inventory planning across all channels and throughout supply chain.

S&OP, Demand Prediction, and Inventory Planning Challenges faced by D2C brands

Predicting Demand: D2C brands struggle to accurately predict demand at the warehouse/CFA/channel level to improve fill rates even as demand fluctuates.

Calculating Stocks Levels At Every Warehouse/CFA/Channel Level: D2C brands operate over multiple channels which only adds to the complexities of maintaining appropriate stock availability at each point of the supply chain.

Predicting The Impact Of Promotions: Predicting the impact of promotions and clearance pricing strategies at each CFA-Channel-SKU level is challenging.

Planning For Combos: Pairing up complementary products is a common practice to increase sales and clear stocks. Nevertheless, pairing the demand of the SKU independently and in a combo over various channels can prove to be a challenging task for demand planners and inventory planners.

Lack Of Consolidated Planning: CPG and DTC companies commonly have their market divided into various zones with their own sales teams and demand planners. These teams come up with their own sales forecast which may not reflect the actual demand patterns. Moreover, there is always a possibility of human error or bias which will result in overstocking and wasted working capital.

Avoiding Stock Buildup: D2C brands face the challenge of stock visibility over every point in the supply chain which may result in a bullwhip effect. Thus leading to overstocking and wasted working capital.

How kronoscope effectively helps D2C brands to Predict Demand and Plan their inventory

Demand Sensing at Warehouse, CFA, and Channel Level: Demand sensing, unlike the conventional way of forecasting demand on a monthly basis, has a more instantaneous outlook. Kronoscope is equipped with AI&ML algorithms for automated demand sensing capability that offers better accuracy of demand predictions at the warehouse, CFA, and channel Levels. This is done by taking into account various influential factors like weather, holiday seasons, changing trends, and cyclic effects.

Proactive Stock Out & Pile Up Predictions: Given the ever-changing nature of demand, pile-ups and stock outs are common situations. Kronoscope enables businesses to ascertain such situations ahead of time and proactively tackle them. It helps demand planners foresee a future pile-up situation and prevents a potential loss of working capital and food wastage. Businesses also have the facility to evaluate the adequate level of safety stocks that will help them steer clear of stockouts.

Impact of Promotional Events: As much as it is important for a D2C business to plan enticing promotions like Buy One Get One Free, Coupons, and Loyalty programs it is also necessary to plan their inventory accordingly. Kronoscope helps demand planners and sales teams add various promotional events and assess the impact on consumer demand. Once the promotional campaigns and the demand levels are calculated, teams can freeze the numbers and Kronoscope will automatically push the data to the purchase and replenishment planning module.

Seamless Demand Sensing for Combos: Kronoscope also has the capability to seamlessly predict demand for combos and then break it into child SKU demand levels. The child SKU demand can be consolidated with the individual SKU demand to give an aggregated and accurate demand for each individual SKU selling independently and in a combo.

Collaboration And Consolidation Of Sales Efforts: Kronoscope’s pricing and promotions planning provide a consolidated avenue for the demand planners and the sales/marketing teams of various zones to collaborate and test various promotional and pricing strategies to maximize sales. Thus, ensuring transparency in forecasted demand and forecasted sales revenue.

Purchase & Replenishment Planning: Kronoscope, with its sophisticated AI engine, helps D2C brands by automatically creating purchase and replenishment plans, factoring in lead times, fill rates, shelf life, current inventory levels, open orders, and dynamic safety stock levels at every depo, CFA, and channel levels.