Inaccurate forecasts are compromising profits

IN General Retail — 21 August, 2013

Blue Yonder together with "Retail Week" took a close look at commerce in the United Kingdom; In particular how forecasting strategies are used in order to contribute towards a businesses' bottom line.

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When asked about the challenges they face this year, many of the companies responded as follows:

  • Boosting sales using highly focused sales and marketing initiatives
  • Creating precise forecasts
  • Improved customer retention
  • Predicting future trends in a timely and accurate manner

It became evident that external factors such weather and holiday data need to be included for optimized sales, materials and demand planning needs.  One person surveyed summarized it well by saying "Our business is highly seasonal and weather dependent."

 It seems that forecast quality has a direct correlation on how sales activities affect demand: Over 41% of those asked planned their sales activity "out of the blue" and many months in advance.  Over 43% found it difficult to plan exact demand for sales activities as they didn’t have the relevant data points available: Should that product be advertised using physical mail or via a website?  Where and how will that dress in the trendy "kiwi" color draw the attention of customers? What will the weather be over the next seven days? It’s clear that factors of uncertainty play a significant role in planning.  

 Over half of those surveyed were not satisfied with their forecasting tools or at the speed of analysis they were able to attain. 92% of those surveyed are convinced that inaccurate forecasts negatively impact the profitability of their business.  92% as a figure certainly deserves a pause for thought.  The sheer quantity, complexity and speed data (big data) is being acquired by retailers is growing at an unprecedented rate. More than half of the participants in the survey are under the assumption that better forecasts will ultimately increase the profitability of their company by 6% to 10%, and about one fourth expect an increase of up to 20%. With a sound, tailored predictive analytics strategy, the future prospects for improved commerce certainly become clearer in the United Kingdom.

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