How inventory optimization can help your business earn more cash this season
This is the fourth article in a series of blogs that discuss how businesses can leverage technology across the entire value chain. The first three installments can be found in the Anaplan.com blog:
Part one: How should my organization approach Connected Planning?
Part three: Align operating expenditures with strategy, manage costs, and maximize spend
“It’s the most wonderful time of the year” is an expression heard on repeat during the holiday season. As revelers plan for parties and shop for gifts, many organizations spend countless cycles ensuring that they have their inventory right for shoppers: the right amounts at the right time in the right location and at the right price. All of this is to optimize their ability to convert that inventory to cash and drive profit for the organization. For planners, this time of year is often accompanied by angst about whether all of their inventory planning was correct and about its critical impact on the finances of the organization—and it can be less than wonderful.
This angst isn’t unfounded. Most organizations find it difficult to align their sales forecasting and demand planning processes, let alone leverage a consensus plan to drive supply and fulfillment forecasts. Having that information inform the cash flow forecast is an even bigger stretch. These processes typically involve a combination of legacy systems, point solutions, and countless spreadsheets. Teams are siloed and interaction is limited at best. Collaboration and consensus are more an afterthought than a reality as most planners are working with outdated information. They’re doing their best to react to a change or request versus proactively evaluating various scenarios and possibilities.
Connecting these processes using a cloud-based Connected Planning platform like Anaplan provides planners—whether they sit in sales, supply chain, or finance—with visibility to their piece of the puzzle. They could understand where their inventory is sitting in the value chain, ensure that it’s aligned to sales forecasts, and proactively negotiate with suppliers for maximizing margins. Optimizing inventory has an immediate efficiency impact, improves cash flow, and drives organizational value.
Let’s say you are in charge of inventory planning for an international retailer. You have several hundred stores, tens of thousands of SKUs, and dozens of promotions occurring across your business in the weeks leading up to December 25. Now imagine that a massive and unexpected blizzard hits the Midwest and Northeast U.S., affecting both deliveries and foot traffic at your stores. With a traditional supply chain planning approach, adjusting your plans, uncovering gaps, and developing scenarios to address the modified forecast would take numerous planners many days to model—time that is already in short supply during the holiday season. With a unified planning approach in which supply chain shares information and scenarios with finance and sales, all of these parties could share information much more quickly and efficiently and collaborate on a revised forecast while keeping business objectives in mind.
Learn how Carter’s removed four to six days of inventory from its supply chain.
https://www.youtube.com/watch?v=vlYeyQhizeI
Increasingly, functional leaders recognize the need to align these processes and create a unified plan from which to make decisions and drive growth. Functional partnership and data handshakes are critical and a cornerstone of transformational change. These organizations are removing days from inventory and drastically improving performance; and finding success in this most wonderful time of the year.
Wishing you peace, joy, and planning success this holiday season.