Best practices in forecasting, replenishment, and allocation in the apparel industry

In today’s fashion and retail environment, retailers face tremendous challenges including shifting consumer preferences, rapidly fluctuating demand patterns, and supply uncertainty. As a result, inventory management across brick-and-mortar stores, wholesale, and e-commerce channels can be intense when implementing the end-to-end process. 

Vikram Murthi, VP of Industry Strategy at o9, spoke with Jennifer Palzkill, Senior Director Inventory Planning at Lands’ End, Elizabeth Elliott, Manager at Columbus Consulting, and Sandya Sundaram, VP Industry Solutions at o9 about the current best practices in inventory management and forecasting. 

Here are four key factors to consider when building out an effective inventory management process. 

Leveraging external data 

External data is helping retailers bounce back from the COVID-19 pandemic by giving them a greater understanding of customer demand which allows retailers to pivot their assortment planning and replenishment. Customers are more digitally empowered and constantly generating data across different channels. The amount of external data available to retailers has grown exponentially, however organizing and converting it to insights can be daunting. 

Using an AI/ML platform to blend external data with a retailer’s internal historical data can help retailers pinpoint exactly how increases or decreases in demand or market share are happening and why, and help retailers create a strategic plan. “This helps you come up with a better brand strategy, which in turn helps you come up with a better-optimized assortment,” says Sandya. 

Prioritizing inventory allocation and replenishment insights in an uncertain economy 

In an environment of both economic and supply chain uncertainties, optimizing inventory can pay off. Companies that use a pooled inventory instead of a separated inventory are able to allocate and replenish quickly in a cost-effective manner. Many organizations are effective at capturing the data tied to allocation and replenishment, but the key is organizing the data into insights that allow planners to make informed decisions quickly. “It has become more complex in an omnichannel world where there’s more pressure from both the customer and shareholders to get it right,” says Elizabeth. 

Capitalizing on the D2C trend 

Direct to consumer (D2C) is a channel with the potential to deliver better margins and a great customer experience. However, this method needs an integrated approach across functions, processes, and systems. With the help of AI/ML technology as well as effective merchandising and planning, retailers can achieve a gold standard customer experience. 

Build flexibility into your inventory placement decisions 

Retailers also need to be strategic about where they place inventory and how they will be able to fill demand. An effective approach is filling multiple channels of demand through a single distribution center (DC). This provides the flexibility to transfer inventory between DCs and stay ahead of potential supply chain disruptions because the retailer already has inventory in its pipeline. “We always have product at the ready to be able to service whichever channel we may need to shift to,” says Jennifer. “So it’s great that we do have our own kind of internal ecosystem to serve product out of our DCs.” 

Another consideration is leveraging a digital twin, which can provide visibility into inventory flow at each node in the network—from suppliers, to all DCs, to stores. “You understand where the capacities are and where there are potential breaches, so you get forward-looking visibility into that,” says Vikram. So, to model your entire network and be able to make those product placement and flow decisions in a more informed manner.” 

All four trends likely play a role in many retailers’ digital transformation initiatives and will continue to evolve just as the industry continues to evolve. Many retailers may feel that their data, AI/ML capabilities, processes, and talent all need to come together seamlessly before they can really make progress and mature in their digital transformation. However, Sandya gives solid advice that retailers should start where there at and incrementally improve (i.e., the crawl, walk, run approach). 

Another key component is educating teams across an organization to create a clear vision for stakeholders to understand the value of a digital transformation and the change management processes needed to be successful. “We all need to educate each other and to educate leadership on what this digital transformation entails. And a lot of times, it’s not clear and the onus is on all of us to clearly articulate what the value is, what the steps are, and what the impact is on people, processes, and change management.”

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About the author

o9 Solutions

The Digital Brain Platform

o9 offers a leading AI-powered Planning, Analytics & Data platform called the Digital Brain that helps companies across industry verticals transform traditionally slow and siloed planning into smart, integrated and intelligent planning and decision making across the core supply chain, commercial and P&L functions. With o9’s Digital Brain platform, companies are able to achieve game-changing improvements in quality of data, ability to detect demand and supply risks and opportunities earlier, forecast demand more accurately, evaluate what-if scenarios in real time, match demand and supply intelligently and drive alignment and collaboration across customers, internal stakeholders and suppliers around the integrated supply chain and commercial plans and decisions. Supported by a global ecosystem of partners, o9’s innovative delivery methodology helps companies achieve quick impact in customer service, inventory levels, resource utilization, as well as ESG and financial KPIs—while enabling a long-term, sustainable transformation of their end-to-end planning and decision-making capabilities.