There’s a Better Way to Align Inventory to Shifting Consumer Demands

Retail and CPG companies have challenges with inventory uncertainties and workforce shortages driven by supply disruptions, inflation, low unemployment, and shifting consumer demand. Yet, to improve productivity and results, two words are often thrown out as the solution: “automation” and “insights.” 

Those words have always bugged me when used as an answer. Want to improve productivity? Inevitably I hear, "We need to automate our work." If people struggle to achieve results, they say, "We need more insights."

Are they wrong? Technically, no. The answer is correct, but the execution is lacking. Insights often translate into more data and reports, and automation becomes "go faster." As a result, people are stuck with more directionless reporting and systems that execute poor decisions (but quickly).

Okay, I'm being snarky. However, I've been on the end of those decisions, and it sucked. I clicked a button and prayed the screen would open. I'd have my system crash on me, lose all my work, and be greeted by the infamous blue screen of death. I'd piece together five reports in a spreadsheet to view what was going on. The only thing I enjoyed was starting my morning report and then going to get my cup of coffee as the computer spun for 20 minutes. Ah...good times, good times.

Better Outcomes are Driven by People using Effective Technology

To achieve more, you must improve productivity which, fundamentally, comes down to whether you provide your people with the right technology.

“Productivity is about people.” 

- Debbie Cohen & Kate Roeske-Zummer, HBR.org

“The new investment [in technology] has contributed to an uptick in productivity by making workers more efficient.” 

- WSJ.com

Now there are promising signs this is occurring across retail, CPG and other sectors. According to the U.S. Department of Labor and prior mentioned WSJ article, we’ve seen increased labor productivity since the beginning of the pandemic (as a nation). Labor productivity grew by 2.2% annually between 2020 and 2021, up from a 0.9% average annual growth from 2011 to 2019.

However, the rise in technology spending is not the only reason for the lift. Modern technology is also delivering a better user experience and more benefits than workers have enjoyed before. After all, businesses were still investing in technology from 2011 to 2019. I discussed this in a previous post.

What is different now? Artificial intelligence (AI), cloud computing, and software-as-a-service (SaaS) solutions are more prevalent and mature. With AI and cloud computing advancements, software solutions can process immense amounts of data. Due to SaaS, software providers have become a lot more accountable, and if they fail, their revenue streams dwindle.

A Rare Opportunity for Supply Chain Executives

Established best practices no longer work today; hence, the supply chain handbook written over the past 20 years has been thrown out the window. But this pain has provided a rare opportunity for supply chain executives to demonstrate innovation – beyond replacing solutions.

A solution replacement that only adds speed and reporting will not solve today's problems.

• Retailers are facing increased customer demand with fewer employees.
• That demand is hard to predict with fluctuating shopping habits and shifting demographics.
• And new, permanent fulfillment options create inventory inefficiencies.

Align Inventory to Shifting Consumer Demand

If you’re a retailer, you need demand intelligence that interprets demand drivers, predicts demand, and feeds inventory systems, such as replenishment and allocation, if you want to be able to make the best decision in the shortest amount of time. The same is true if you’re reliant on CPG companies and need to be able to coordinate replenishment effectively. Plus, employees need to know what customer demand will be and when. Where are their customers going to shop? Where do they want it fulfilled, and when? Collectively, you must all know where to place inventory across the entire enterprise – and supply chain – to meet goals while understanding the trade-offs.

Additionally, these demand predictions can't remain static. They must be able to sense changes. A 2-month-old forecast doesn't always hold true. What happens if there is a heatwave, winter storm, or viral video? How do you adjust?

That’s why you’re going to derive the most value today from demand intelligence. If your brand new replenishment, allocation, or pricing system does not provide this type of intelligence, then you’ll be no better off than if you had stuck it out with your old, inflexible, rules-based systems. A system with a modern user interface (UI) that runs off newer hardware is a replacement solution – not an innovative, game-changing solution. And right now, the only way to stay consistently competitive – to know where you need to place inventory to meet customers’ new daily demands – is by doing things differently than you have before. By predicting demand differently, and with more intelligence.

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Editor’s Note:

Curious what “different” looks like or how you can incorporate more demand intelligence into your business processes and systems? Check this out.