Last year, I wanted to be a grateful child and buy a sweater for my mom. It was mothers day, so I logged on to one of the prevalent e-commerce sites.
I browsed and eventually found quite a few sweaters in lilac, my mother’s favorite color. To my delight, I found one that was on promotion. I was excited to place the order right away so my present would arrive in time for Mother’s day. But I was shocked to see my mom’s size was not available in stock. This got me thinking “What is the purpose of having a mother’s day promotion if people like me can’t find the right size for their moms?”, “What did the company do insufficiently? Is there a way they can improve availability during these special day promotions, so shoppers like me are not disappointed?”
The answer lies in promotion management.
What is Promotion Management?
Promotion Management is defined as optimizing the utilization of tools, strategies, and resources to promote a product that will generate additional demand. To achieve this, you identify your potential customers, decide your promotion budget, and select your product to promote.
Let’s face it, who doesn’t like discounts or promotions on products they want to buy? I most certainly do. And from a seller’s point of view, selling additional units and earning the goodwill of customers is always beneficial. So optimizing the promotion process leaves everyone involved better off.
Why should we consider Promotion Planning in Inventory Management?
Retail companies, whether it be e-commerce, brick-and-mortar, or both, care about the inventory they keep. Too much stock, they don’t enjoy their profits as much and incur unnecessary expenses. Too little, they lose sales and sometimes their customers while the marketplace is getting more and more competitive than before. No company is willing to stay a step behind their competitors.
During promotional management, especially for big events around special days and holidays, inventory levels need to be adjusted to meet the peaks in demand. This requires using advanced analytics to analyze historical demand patterns, link the demand peaks to the promotional offers, and adjust future forecasts based on planned promotions. With the availability of a multitude of tools and digital solutions, all this processing and prediction can be easily automated. Promotion-sensitive demand forecasts at the granular level are then used to adjust inventory targets and drive additional replenishment and procurement decisions. When demand forecasting, inventory planning, replenishment, and procurement are done in an integrated fashion, availability of the individual sizes of products improves, maximizing sales.
Also, business KPIs such as customer satisfaction and sales conversion are heavily dependent on inventory availability. Therefore intelligent inventory management benefits the business results as well as the brand image.
The solution lies where every good solution lies nowadays: Data, Machine Learning & Artificial Intelligence
This is where promotion planning software plays its part. The solution of incorporating promotions while managing inventory lies in data analytics. Machine Learning (ML) and Artificial Intelligence (AI) are two of the most amazing tools the new millennia brought in innovation. Most business problems of the era are solvable because of these two technologies via promotions software. Use retail promotion analytics to generate past sales data, organize the data, process the data, and generate recommendations and actions. These steps do not happen magically overnight, ML & AI make them possible.
If the company I wanted to order a lilac sweater for my mom considered the importance of keeping an optimized inventory considering their promotion, my sole reason for writing this blog would not exist. If they had done inventory planning thoroughly and analyzed the patterns of past mother’s days to project demand, they would have anticipated the additional demand better. If they were using tools and solutions for this process and utilized the necessary technologies of ML and AI, they would have never run out of promotional products for their customers; whether it be different colors, different sizes, or any other product differentiating metric. This is the importance of using inventory planning and optimization software so that inventory management across all the supply chain is made possible.
Companies should comply with modern retail standards and employ the necessary measures to meet ever-challenging customer demands by using a promotion planning software. Hopefully, I will have better luck finding the perfect present for my mom this mother’s day.