Future Fortunes: why predictive data is the key to success
To profit in the current climate of intense competition, consumer caution and narrow margins, retailers need to run a lean operation. Retailers need to work with their suppliers to achieve a streamlined, efficient supply chain that is beneficial for all parties.
Right here, right now
The importance of data insights has been a hot topic in retail for some time now, so the vast majority of businesses will already be aware of the importance of data accuracy and analysis for speed of performance and cost-effective decision making. Nowhere is this more prevalent than in the supply chain, which must enable the fast delivery of goods to keep the customer happy, at the same time as protecting margins.
Increasingly, retailers and manufacturers are adopting a demand-driven approach to the supply chain, using live data to optimise stock and minimise costs. The word live is paramount here; retailers need information delivered in real-time to react to what is happening at that moment, whether that means moving stock across channels, or alerting trading partners to the need for replenishment.
The good news for consumers is that more and more retailers are nearing the points where real-time data insights are a reality for their business. Many have invested in the technology to achieve this, such as Electronic Data Interchange (EDI), which standardises business information to allow the quick, accurate and reliable exchange of data with their suppliers, reducing lead times and the amount of safety stock required. Requesting suppliers to send acknowledgments and advanced shipping notifications (ASN’s) enables retailers to know in advance exactly what is going to be delivered, enabling them to take the necessary action to ensure that potential shortages do not impact their customers.
However, the continually rising bar is a double-edged sword for retailers. On the one hand, they are getting closer to running their business operations based on demand. But, on the other hand, so are many of their competitors.
Look into the future
To outperform the competition, therefore, retailers need to look beyond reacting to what is happening now, and strive to accurately forecast what will happen in the immediate future. This is the most effective way to deliver on what their customers want, at the same time as running a lean supply chain operation, and protecting margins.
So how does the retail sector move from real-time to predictive analytics?
The answer lies in being able to accurately capture and interpret business data. By looking at what has happened historically, identifying trends, and working out averages, retailers can forecast demand.
And as most of the inaccuracies and inefficiencies in the supply chain begin with forecasting problems, predictive analytics lay the foundation for a leaner, more profitable operational model. For example, using an accurate forecast then enables retailers to directly dispatch instead of holding stock, meaning they can order significant quantities of items without tying money up in stock. EDI enables retailers to send their suppliers short and long-term forecast information enabling suppliers to more accurately plan future resource requirements.
Equally, predictive analytics can be useful to prepare for the peak trading period, when demand can fluctuate and spike rapidly. However, it is worth bearing in mind that any insights should be directly linked to retailers’ multichannel offerings, to manage consumer expectations. For instance, if an item is no longer in stock on Black Friday, retailers’ websites must update instantly to avoid consumers purchasing stock that does not actually exist.
Forecasting future fortunes
For any retailer looking to embrace predictive analytics, accuracy really is the key. It is impossible to forecast future demand without detailed insights into what has happened previously. Equally, this information has to be available in real-time, so that forecasts can be updated as the current climate changes.
The challenge for many retail organisations, therefore, is to find the right software to do the job effectively, and this is where EDI comes in. By standardising information, retailers can factor in not only their own data, but those of partners and suppliers, to create the most comprehensive model possible for predicting future demand.
With accurate data and the means of exchanging information in real-time, retailers have the platform required to launch predictive analytics – so whether they are looking at Black Friday or a random Tuesday, they can forecast exactly what stock their business will need.
Robert Simpson, European Marketing Director at EDI managed service provider at TrueCommerce.
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