For some organizations, the assessment could involve the analytics itself. What worked well, and what information the company is still lacking in order to make the best decisions for itself. When it comes to the supply chain, some companies are celebrating successes as they celebrate a new year…but some of what lies ahead in the new year is evidence that analytics work is never done.
In 2021, retailers were scrambling to acquire inventory, with many falling short amid all kinds of supply chain issues. In 2022, many places were left with too much inventory as demand decreased. 2023 saw a lot of businesses back where they expect to be in terms of inventory, and a lot of that is due to the work they did using data to help them.
Five Below is an example of a company that was able to use analytics to improve inventory forecasting, ordering, replenishment, and flow. By making informed decisions about which items customers are looking for, the store was able to stay ahead of trends, make customers happy, and keep items moving through their stores.
Five Below is also unique in that it tries to keep the items it sells at a certain price level – ideally, five dollars or less. The organization uses its data to target inventory that fits its specific criteria, meaning it can continue to meet the expectations of its customers while maintaining a healthy bottom line.
One factor that retailers also need to take into account at the beginning of the new year is merchandise returns. Peak return season starts around Thanksgiving and can continue into late January, and that can have an impact on inventory management. Of course, there’s data for organizations to assess around returns too.
Some retail companies have looked at the numbers to weigh whether to institute policies aimed at limiting returns, such as fees or shorter return windows. The upside for many retailers is limiting bad actors looking to abuse the system or trying to commit fraud, but certain return punishments can also alienate customers. That’s the other thing that data tells them – the majority of customers make the most returns at the stores where they shop the most. Companies want those shoppers to come back.
Obstacles lie ahead
As any organization knows, disruption can interfere with the best laid plans at any moment. The end of 2023 and beginning of 2024 brought another reminder that even though one issue might seem solved, there’s always another potential problem around the corner. For ocean freight, violence in the area has forced some companies to rethink travel through the Suez Canal, while low water levels at the Panama Canal have led to restrictions on travel there.
While both of these situations are less than ideal, the past few years have helped prepare companies for these situations, and many have the data they need to figure out alternative solutions. When a ship blocked the Suez Canal in 2021, the organizations that were affected needed to look at alternative routes or different suppliers that could help them avoid that area altogether. As the prices of shipping containers skyrocketed, companies crunched the numbers on alternative solutions, from owning their own containers to trying to handle their own transportation. Some of the same information from those instances, updated to include the most current data, can be used to figure out how to navigate these disruptions.
One of the reasons retailers were preparing for a busy return season at the start of 2024 is because of the successful holiday sales season they had at the end of 2023. For many companies, that was because of the analytics work they did to make sure they had products on shelves or available to online shoppers. That might seem like an obvious statement, but for many organizations, there were hard lessons learned over the past couple of years when, for a variety of reasons, certain products didn’t reach their destinations or the wrong products sat on shelves for too long. Those same organizations are still putting their data to work to make sure the new year continues in the same way.