20/12/2018 | Written by: Nicolas Draguez
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My daughter Clémence is both nervous and excited by the perspective of Saint-Nicholas arriving with her presents. She posted her wish-list in a letter to him in Spain. What she doesn’t realize is the pressure her expectation generates in the supply chain. As an Industry Solutions Executive at IBM I mainly work with retailers and consumer packaged goods (CPG) companies. But I’m also a father and together with the enterprises I want to make sure that Clémence’s wishes are realized!
It’s vital for manufacturers and retail companies to understand the market demand. This is especially crucial for November and December. Toy retailers can make up to 75% of their annual turnover and profits. And with the holiday season fast approaching, they need to perfectly understand the Christmas wish-lists of children and their parents.
This makes it very challenging for the CPG manufacturers to produce the exact products consumers want to buy. Their retail customers must ensure these products are readily available on the store shelves. But also on their web sites in sufficient quantities. They need to have the right logistics partners to ensure on time delivery of the online sales. Late buying, huge demand spikes concentrated during a very short period, and higher consumer expectations are the market dynamics!
In the Benelux the shopping period is concentrated in a period of 20 days in December. And this with 75 percent of the customers still buying in physical stores (source: Deloitte study). There is no room for mistakes!
To meet the market, dynamics retailers must make the correct choices months in advance to ensure gifts are delivered on time and rightly presented in store and online. Their most critical concern is being out-of-stock. Not having the right product for ‘late’ parents means subsequently missing a sale. But retailers cannot offer the full range of choices. Because of the required cash and the limited physical space. They must also ensure not to be over-stocked with the ‘wrong’ products. And avoid being stuck with pre-bought toys which are not sold, remaining in their back-store, and delivering no return. Getting this fine-tuning correct requires both in-depth experience and market knowledge.
Rising online sales may seem to ease this fine-tuning with large centralized and consolidated stocks. This delivers new challenges. Retailers must ensure correct delivery time for gifts and toys ordered online to satisfy the customer expectations. All this in a high demand period. In France, where online toys sales are very important, large retailers deliver up to 30.000 packages per day.
Technology can help by performing a good analysis of this high volume of data. Early identification of trends, efficiently getting goods to market and more importantly, ensuring the supply meets demand. Prepare your gift season. Build a platform to help discover the next hot new toy!
Fuel it with data collected by the retailers, marketers, toy manufacturers and shipping partners. Analyze data from prior peak shopping periods to identify customer preferences. When they like to shop. What they buy and what they don’t buy. What deals they respond to. What features they look for.
Compute data such as demographic, social, in-store, mobile and online information. Build models to identify regions or households that are purchasing the hot toy and when. Complete your models with the most current available data from social media and other channels, related to toys. Apply machine learning techniques to refine your models which enables you to zoom-in. Make it possible to target the households likely to buy the same toy with personalized marketing campaigns.
Review your actual daily sales figures to ensure appropriate replenishment of the best performing stores, ensuring their stock can remain optimum. For the ‘supply’ side of the supply chain, retailers are using different transactional systems. For example warehouse management systems and transportation management systems. They will be used to efficiently manage the inventories and the flow of toys from manufacturers to stores. Tracking and monitoring these systems will generate insights like reduce costs, reduce delivery time and reconcile demand with supply over the complete end-to-end value chain.
Download the Forrester Study on demand and assortment planning challenges and predictive analytics opportunities.
Learn from mistakes
Systemically organize satisfaction surveys to get the customer’s feedback, measure the delivery quality, and expectations management. By analyzing all the most pertinent data, retailers better understand where the challenges are in the supply chain. They can analyze the most frequent issues and define effective remediation actions. A big toy retailer chain reduced calls related to services concerns by 60 to 70 percent by doing so! This freed their employees time to increase service levels. Retailers must also ensure their web-shops are both attractive with simplicity and easy of navigation for their consumers. Whilst being performance monitored to avoid issues during peak periods.
IBM is not the company that builds Saint-Nicholas’ complete supply chain that makes children like Clémence get their wishes during the holiday season. Neither do we build all the systems and tools involved. What IBM does is implement and integrate those systems, and bring the artificial intelligence and cognitive computing which delivers you the needed insights.
Therefore, IBM assists Santa’s little helpers to gather, accumulate, and take insights from data in order they are best positioned to anticipate future trends, meet the demand for them with optimized supply, and help their customers to fulfill their wish-lists. What are this year’s hot toys going to be? Saint-Nicholas will tell you that, aided by a little bit of technology!
Learn more visiting our dedicated website .