7 Ways to Optimise Inventory, Supply Chains and Operations for Shopping Holidays

In short:

• Forecast uncertainty + potential order volume increases = stress on your entire supply chain. How to cope?
• To start, consider scaling back inventory options to avoid being left with stock you’ll need to liquidate.
• Stress test everything, from your website to your supply chain to pick, pack and ship operations. Here are more ideas to implement now.

The collective anxiety as we head into the all-important holiday season is almost palpable: There are far more unknowns than knowns, making it difficult to prepare for what is usually retailers’ most demanding, and lucrative, stretch. Adding to the stress is the continuing uncertainty about retail spending and consumer sentiment since the pandemic turned the industry on its head.

More than ever, businesses have been forced to look inward and study their own data to forecast sales and determine the best strategy for shopping holidays.

For the most part, online-only or online-focused brands have thrived or at least held their own during times of physical distancing and lockdowns. For example, the share of ecommerce in retail sales in Asia-Pacific is expected to grow by ten percent by the year 2025, reaching 61 percent. Even as retail stores reopened across the region, online sales have remained relatively strong.

On the other hand, many retailers that still rely primarily on brick-and-mortar sales — some of them already in deep financial holes — have reached their breaking points. Global brands such as J.Crew, Hertz and Brooks Brothers have been undergoing bankruptcy proceedings since May.

As shopping holidays approach, most retailers have placed orders for the season, and many are receiving their first shipments. But given the underlying uncertainty, how are retailers preparing for this vital stretch, and what can they do before orders start rolling in to set themselves up for success?

Mind the Supply Chain

Supply chain disruptions became one of the most common and substantial challenges for not just retailers, but all businesses during the pandemic. A report from Frost & Sullivan found that 42% of entrepreneurs across Asia-Pacific said Covid-19 had negatively impacted their business.

Procurement has been an issue. Many suppliers temporarily closed, shifted operations to produce products currently in demand or didn’t survive the economy’s nosedive, said Matt Rhodus, industry principal and director of strategic initiatives at Oracle NetSuite. That’s forced some businesses to turn to new, unproven suppliers, many of which want a bigger upfront financial commitment because they fear they won’t be paid, Rhodus said.

But that eats up even more of retailers’ precious cash on hand.

At 203 years old, Bladnoch Distillery is Scotland’s oldest independent maker of single malt whisky, now run by Australian entrepreneur David Prior. When the pandemic hit, demand for whisky was at an all-time high but Bladnoch’s traditional hospitality and retail customers were shuttered due to government restrictions and shipments were being delayed.

Fortuitously, Bladnoch’s Melbourne headquarters had received a large order just before restrictions came into play. With stock on hand, the business realised it had a supply advantage but needed to reach new customers in order to capitalise on it. With NetSuite, the business managed to stand up an ecommerce website within a month and started selling direct to consumer.

The rich data the business was receiving from their ecommerce platform enabled it to closely manage its supply chain in the following months, and even launch new lines to delight their retail customers. This deft management of inventory helped the business grow revenues by 20 percent while the overall category dropped by 25 percent.

“Pre-COVID we weren’t selling online. It has been really successful for us, especially for a brand like ours with exclusive releases. Online has become one of our top markets in the last 12 months,” David Prior, CEO said.

The Uncertainty Factor

Retailers are also looking for ways to build resilience given that governments could once again shutter nonessential businesses. The team at Sanitary Care Products Asia (SCPA), a Philippines-based company offering hygienic paper products made for personal use, understands all too well how quickly things can change in business.

In 2012, disaster struck as a fire destroyed SCPA’s on-premise servers, halting almost all business activity.

The team dug deep and emerged with a new back-office infrastructure that could protect its data from disasters and support its business growth more effectively. SCPA deployed NetSuite OneWorld with the help of NetSuite partner CloudTech to streamline its mission-critical business processes, eliminating countless risk factors that existed previously.

With a unified view of operations and greater process speed — the team can now collect payments 42% faster — SCPA has sales insights and planning capabilities at hand to navigate the most challenging of times.

Still, despite the uncertainty, there are a few trends retail experts believe will shape the holiday season.

7 Suggestions for a Successful Holiday Season

It’s no surprise that ecommerce sales will grow substantially as a portion of total retail spend. While online shopping orders may have dipped since the height of the pandemic, they are still predicted to grow for many businesses across Asia Pacific as shown by Statista. for many businesses. There is no doubt that online sales will likely continue to increase at a much higher rate than previous years.

The number of customers opting for buy online, pick up in-store (BOPIS) — something retail insiders have recommended for years — will also increase dramatically. Many companies have added this capability since the start of the pandemic, with kerbside pickup, or even car boot delivery, particularly popular since customers don’t have to step foot in stores.

Holiday sales may also be spread across a longer period of time than usual as online purchases reduce the need for daylong shopping trips leading up to the holidays.

Based on those trends and conversations with retailers and industry experts, here are a few ways retailers can position themselves for a successful shopping season:

Double down on direct to consumer: The rising importance of D2C is tied directly to the surge in ecommerce sales. In fact, almost overnight, ecommerce has become a necessity for even old-school retailers.

Aside from the fact that more consumers are looking to shop online and therefore buy direct from manufacturers, D2C has higher margins and enables brands to build direct relationships with their customers. Retailers’ own ecommerce sites need to be the priority.

If you have limited things that you can produce and you can procure, and you could sell it direct vs. deal with retail channels that you can’t even guarantee are going to get paid, it’s an easy decision to go direct.

The unpredictability of the physical retail channel — especially with ongoing health concerns — is another reason for businesses to double down on their own ecommerce sites.

A closer relationship with end consumers helped Bladnoch bring newer and more distinct whiskies to market faster, while ensuring sales could stay consistent even as hospitality restrictions fluctuated.

Think strategically to strike the right inventory balance: The difficulty of demand planning in makes inventory planning equally challenging. Retailers that still have the ability to get as much stock as they want must be careful to not overbuy to the point that they will be in financial trouble if they don’t sell through most of it.

That means it’s harder than ever to recoup the cost of unsold inventory. And, more online shopping mean the volume of returns is already up, forcing retailers to get creative to wring out revenue.

Favour more conservative inventory projections this year to increase the chances you sell through the majority of your stock — and avoid having an uncomfortable amount of cash tied up in inventory. Companies that have not already finalised purchasing for the holidays should also look beyond the upcoming season when inventory planning.

“We’ve tweaked our line plans for next spring and fall to factor in this year’s ending inventory rolling forward,” Williams said. “We are planning to protect our gross margin rather than face a massive liquidation this fall.”

Inventory management is all about retailers ordering the right products, too. Trends, as well as historical data, should shape predictions about what experiences, product categories or items will be popular among shoppers and improve the accuracy of forecasts. We already know tops are outselling pants (thanks, Zoom meetings). What else will more intimate holiday celebrations and ongoing remote work bring?

Purchasing the right items also minimises excess inventory.

“I think widespread across the industry, what we’re hearing is that companies are making decisions around their assortments and narrowing the assortments to try to be more focused to ensure good sell through on the products they do buy,” Hand, the IDC analyst, said.

Stress test your operations: When asked about potential risks heading into the holidays, Williams cited technology as one. Indeed, retailers have become reliant on technology to transact, fulfill and ship orders. Selecting leading, battle-tested solutions greatly reduces the risk of tech-induced failure, but all retailers should still stress test their systems before things get crazy.

Cox & Cox, for example, is load testing its ecommerce site and picking/packing systems to avoid unpleasant surprises when it’s flooded with orders.

The increase in online traffic and purchases over the last few months have put systems to the test for many retailers, but those same businesses should plan for even bigger surges as the holidays approach. A website or back-end system outage will be more costly than ever this year with the rise in ecommerce spend.

“Stress test early, and just make sure you’re ready for that volume, because you could receive spikes unlike anything you’ve seen before,” Rhodus said.

But technology is not the only component here. Retailers that own their own warehouses must make sure they have the right people and processes in place. For companies that previously relied on wholesale, what changes do you need to make to picking and packaging to accommodate a much larger number of small orders? Will couriers now pick up packages several times per day instead of just one bulk shipment at the end of the day?

This is an even more complicated equation in the age of COVID-19, as businesses must follow social distancing guidelines and sanitise frequently to keep staff safe and avoid shutdowns. That may require additional changes to the warehouse layout, staffing and processes.

Overcommunicate with vendors: Retailers should check in with their suppliers multiple times per week for status updates on all purchase orders, whether items are still being manufactured or in transit. This may have been overkill in the past, but it’s necessary given the speed at which things have changed since March.

“I’ve probably never had as frequent communication with our suppliers as I have recently,” Cook said. “They’re working in this unknown environment as well, where things change quickly for them, and they’re adapting as best as they can. So for us it’s mainly about information sharing so that we can plan as best as we can.”

As Cook suggests, it’s far better for a retailer to know about a problem sooner rather than later so it can figure out a solution. Frequent communication will also strengthen the business’ relationship with those suppliers, which can only help if it needs to put in a rush replenishment order this fall after a few products take off.

Communication is also key for organisations that use third-party logistics (3PL) providers. Although this eliminates many operational challenges, it’s important to give the 3PL clear expectations for demand and understand how that could affect order-to-ship times. If the fulfillment partner is not confident it will have the capacity to keep up, find a new or secondary 3PL right away.

Don’t be afraid to sell products early: While the “Cyber 5” stretch that runs from Thankauiving through Cyber Monday will still be critical to retailers’ success, the longer holiday shopping season could mean sales are not as back-loaded as usual. Cox & Cox received its Christmas products a few months earlier than usual and will start promoting them in late August, earlier than in past years. The hope is that this will help the retailer turn its inventory quickly.

“For us, providing we get all of the stock, get it all in on time, I think this year we’ll probably sell it earlier, and that’s what we’re hoping to do,” Peet said. “We’re hoping to sell our products as soon as we can to just take the pressure off us toward the end of the year.”

Selling through inventory quickly reduces the chances that a second lockdown in the United Kingdom has a major impact on Cox & Cox’s sales. The sooner sales start rolling in, the less opportunity for additional disruptions that prevent the company from meeting its goals.

The reduced pressure should lessen the “pinch points” that Peet said massive order surges create in the warehouse — it’s common for Cox & Cox to receive 10,000 orders in one weekend during the busy season. That will help the company better meet customer expectations and drive repeat business.

Consider selling on online marketplaces: Retailers new to ecommerce may not have the advantage of a recognised brand that will pull in shoppers looking for gifts during the holidays. Digital advertising can help increase brand awareness, but it may not be enough to make up for cancelled orders from large retailers.

They need an alternative to capitalise on the spike in online sales.

This is where marketplaces come in. They already have a huge audience and are where many consumers start their searches for a product. Amazon, Shopee and Alibaba are good places to start.

Using these marketplaces is a great way to diversify and find other means and channels through which to sell inventory.

There are countless other marketplaces specific to certain product categories, like software, electronics or furniture, that these distributors and retailers should evaluate, as well.

Most marketplaces have seller programs that make it easy to get started and manage an online storefront. While the marketplace collects a commission on every sale, this channel could become a steady revenue generator, and the barrier to entry is low.

Be ready to adapt quickly: The reality of 2020 is that much remains unknown about how this holiday season will shape up. That means retailers will have to adapt on the fly.

“[Planning] is a lot harder,” Cook said. “You’re making a lot more last-minute decisions, and you don’t have a ton of foresight or confidence in what you’re going to be able to sell two months from now.”

There is no single formula that ensures retailers will not run out of product quickly or have too much left over. Purchasing and inventory management is “as much of an art this year as it has ever been science,” Rhodus said.

Pay close attention to the data that comes in during September and October to see if it sheds light on what will happen in November and December. If the wholesale channel starts to take off, an organisation may need to rethink its workflows to efficiently pick and ship pallets rather than eaches. If sales continue to be much higher for online-focused brands, they may need to scale back Cyber Monday and Black Friday promotions to avoid running out of inventory too quickly while also preserving unit margins.

Retail leaders should stress the importance of employees being ready to shift gears quickly and help out where needed as the season plays out.

Signs of Retail Recovery

Although the past year has been an immensely challenging year for many retailers, it’s not all doom and gloom. Consumers continue to spend, although their preferences may have changed. For example, consumers in China and Indonesia are more aware and cautious about physical health, while Japanese consumers have become increasingly conservative. In Australia, spending activity during shopping holidays remains positive — something that gives cause for optimism.Then there is the rising adoption of ecommerce, which has generated record sales for many businesses. Smaller retailers with a strong online presence are in an advantageous position to capitalise on consumers’ rapidly shifting preferences.

The lessons learned and creativity demonstrated throughout the pandemic provided valuable practice for upcoming shopping holidays. Retailers will need to harness that same ingenuity and ability to respond quickly to business-shifting developments to thrive in the coming months.