The Art of Allocation- Right stock, place and time
Written by Lee Gill, VP Retail Strategy, JDA
The days of selling within seasons are long gone; sales periods that once spanned months have now shrunk to weeks. This ‘multiplier’ effect presents retailers with huge challenges, because shoppers want the latest, most fashionable products immediately. So how do retailers ensure that high-fashion products with short lifecycles are placed in the right channels, in the right quantity and replenished carefully to minimise end-of-season markdowns?
Retailers today commonly push products quickly into stores using a ‘scattergun’ approach. When new products land in the distribution centres or warehouses, 60-70% is often sent directly to stores. Sizes and colours are distributed evenly, no matter where the stores are located and regardless of the buying patterns of local shoppers. This manual allocation process has a single goal: moving merchandise rapidly. There are benefits to this approach in that trendy products are available when consumers demand them, and retailers know that at least some of their merchandise is reaching customers.
But this approach also has a downside: where merchandise fails to sell as hoped, costs accumulate because of the need to transfer stock or mark it down. Large quantities of misdirected merchandise also interferes with retailers’ ability to turn over inventory and make space for new products. This is where intelligent allocation software can make a huge difference.
Matching supply with demand – with greater precision
By using this software to gather and analyse data on local demographics and shopper behaviour, retailers can adopt a more scientific approach to allocation that’s tailored to specific stores. The flow of stock can also meet store demand without sacrificing speed. Each store gets the merchandise they need, in the right blend of colours and sizes, without being overloaded or understocked.
If retailers’ initial assumptions on allocation prove inaccurate, this can easily be rectified in the replenishment stage by redirecting their second wave of stock to stores that are performing the best. And when it comes to the final push, they can employ the same targeting techniques to allocate markdowns.
Boosting availability, flexibility and profitability
Allocation software can transform an inefficient, inaccurate process into something precise that matches products with demand at local store level. Some retailers have even been able to automate 95% of their daily allocation activities, vastly reducing the amount of staff time dedicated to them.
Intelligent allocation is helping retailers to boost sales by delivering greater product availability. It’s also having the same effect on their profit margins, by drastically reducing markdowns, terminal stock levels and inventory carrying costs. In fact, one international fashion retailer has managed to improve its store sales by 9.9%, while another has increased its in-stock rates from 90% to 97% - with no increase in inventory.
In today’s complex retail landscape, it’s vital to have the right products in the right place at the right time to satisfy individual shopper demands. Armed with smartphones, tablets and laptops, modern consumers are well equipped to shop elsewhere if they can’t find what they’re looking for immediately. The retailers who can respond quickly and allocate their products precisely are the ones who’ll succeed in the future.
DHL Claim Multi-Sector Collaboration Key to Fighting COVID
Since January, global logistics leader DHL has distributed more than 200 million doses of the COVID vaccine to 120+ countries around the globe. While the US and UK recently rolled out immunisation plans to most citizens, countries with less developed infrastructure still desperately need more doses. In the United Arab Emirates (UAE), which currently has one of the highest per-capita immunisation rates, the government set up storage facilities to cover domestic and international demand. But storage, as we’ve learned, is little help if you can’t transport the goods.
This is where logistics leaders such as DHL make their impact. The company built over 50 new partnerships, bilateral and multilateral, to collaborate with pharmaceutical and private sector firms. With more than 350 DHL centres pressed into service, the group operated 9,000+ flights to ship the vaccine where it needed to go.
With new pandemic knowledge, DHL just released its “Revisiting Pandemic Resilience” white paper, which examined the role of logistics and supply chain companies in handling COVID-19. As Thomas Ellman, Head of Clinical Trials Logistics at DHL, said: “The past one year has highlighted the importance of logistics and supply chain management to manage the pandemic, ensure business continuity and protect public health. It has also shown us that together we are stronger”.
Multisector partnerships, DHL said, enabled rapid, effective vaccine distribution. While international scientists developed a vaccine in record time—five times faster than any other vaccine in history—manufacturers ramped up production and logistics teams rolled out distribution three times faster than expected. When commercial routes faced backups, logistics operators worked with military officers to transport vaccines via helicopters and boats.
In the UAE, the public-private HOPE Consortium distributed billions of COVID-19 doses to its civilians as well as other countries in need by partnering with commercial organisations such as DHL. For the first time, apropo for an unprecedented pandemic, logistics companies made strong connections with public health and government.
“While the race against the virus continues, leveraging the power of such collaborations and data analytics will be key”, said Katja Busch, Chief Commercial Officer DHL and Head of DHL Customer Solutions & Innovation. “We need to remain prepared for high patient and vaccine volumes, maintain logistics infrastructure and capacity, while planning for seasonal fluctuations by providing a stable and well-equipped platform for the years to come”.
How Do We Sustain Immunisation?
By the end of 2021, experts estimate that we need approximately 10 billion doses of vaccines—many of which will be shipped to areas of the world, such as India, South Africa, and Brazil, that lack significant infrastructure. This is perhaps the greatest divide between countries that have rolled out successful immunisation programmes and those that have not. As Busch noted, “the UAE’s significant investments in creating robust air, sea, and land infrastructure facilitated logistics and vaccine distribution, helping us keep supply chains resilient”.
Neither is the novel coronavirus a one-time affair. If predictions hold, COVID will be similar to seasonal colds or the flu: here to stay. When fall comes around each year, governments will need to vaccinate the world as quickly as possible to ensure long-term immunisation against the virus. This time, logistics companies must be better prepared.
Yet global immunisation, year after year, is no small order. To keep reinfection rates low and slow the spread of COVID, governments will likely need 7-9 billion annual doses of the vaccine to meet that mark. And if DHL’s white paper is any judge of success, multi-sector supply chain partnerships will set the gold standard.