Look at Localized Market Factors to Mitigate Demand Latency Issues
Forbes covered “the dark clouds hang low over multiple retailers threatening profitability” in an article entitled The Demand Latency Hangover.
The article highlights the disconnect, due to timing, between shifting consumer purchasing patterns and a retailer’s supply chain. “Using conventional demand processes, the time to translate market demand to replenishment can be weeks, even months. This is too long to drive a profitable response.”
The author suggests that this demand latency problem arises because traditional approaches remain very supply chain centric focused on historical demand patterns and this is “ineffective in translating shifts in markets at the speed of business.”
“The lack of demand sensing, or the use of market insights, to drive the retail response results in a demand latency hangover.” Forbes suggested that while most companies have demand management solutions very few leverage market drivers to proactively adjust demand flows to reduce demand latency. “This results in mistakes in investor forecasts, inventory holding strategies, and merchandising programs.”
One always changing and consequential demand driver retailers should consider to push back against latency is the weather. Think about it… what is more local than the weather? Translating those local meteorological conditions into measurable, easy-to-integrate metrics for demand forecasting and store replenishment or inventory management solutions produces real benefits by knowing sooner when demand shocks will occur and accelerating replenishment cycles. Fewer stockouts. Reduced markdowns. Improved customer experience. Less waste.
Planalytics’ Weather-Driven Demand (WDD) analytics are used by leading retailers, restaurant chains, and consumer goods/services companies to stay a step ahead of shifts in buying behavior. WDD metrics isolate and quantify how changes in the weather will lead to periods of increased or decreased demand for specific categories in specific markets.
Using predictive WDDs to manage the weather’s impact on local demand will not completely solve demand latency issues, but it is a proven way to bolster one’s demand sensing capabilities and mitigate some of the negative ramifications that surface when inventories are mismatched with consumer demand.
“We must rethink our approach to demand management and unlearn the bad habits of using latent data to forecast future sales,” concluded the author. “There is no substitute for a market-driven approach to demand management.”