Your financial plan is based on accurate assumptions. Your product mix reflects local demand and trends. Inventory is precisely mapped to your channels. In short, the plan is good. Yet by the end of the season your revenue is below expectations and your margins are eroded. Why?
You’ve been hit by the latency tax.
In other words, the issue might not be the plan itself. It may be the speed at which your organization responds when market signals change.
The latency tax is the cumulative financial cost of delayed decisions — from the moment an input changes to the moment inventory, supply, or pricing is adjusted in response.
New research from Anaplan, Incisiv, and World Retail Congress has uncovered a clear path to reducing this burden. The report findings highlight where retail leaders have made investments to reduce that five-cent figure to closer to two cents.
For a $1 billion retailer, that equates to a $30 million advantage.
Missed signals mean missed goals
The latency tax is driven by four operational gaps:
Measurement latency: When the capture of critical inputs like demand signals fails to keep pace with changes, retailers pay the price of acting on information that is out of date. Two-thirds of retail executives we surveyed refresh their forecasts at best once a month.
Decision latency: When deviations in trends — such as sales velocity or forecasted demand — need to be identified manually, and require lengthy debates to address, retailers miss the window in which action still makes a difference. Three-quarters of retailers still rely on manual or alert-based exception handling, where action depends on a human interpreting the signal.
Execution latency: When the speed of decision-making outpaces the ability to adjust upstream supply or in-market inventory, retailers’ well-intentioned decisions fail to reach the market in time. Nearly 70% of retailers are only able to refresh in-market inventory monthly.
Attribution latency: When smart technology investments or operational changes are made without a mechanism to measure their success and embed them consistently in decision-making, retailers fall back to outdated methods and subpar results.
The leaders that emerged in our research as most successful in closing these operational gaps are proficient at connecting strategy tightly to execution, in tune with accurate insights. This enables them to act on up-to-date information, not last month’s predictions, and turn agility into profit.
So, what do they do differently?
Closing the gap between insight and action
- Leaders plan against emerging demand signals, not last month’s assumptions, keeping up to date with demand signals as they change. 90% of leaders update their forecasts weekly or more frequently.
Recognizing that what gets measured, gets managed, they prioritize the metrics aligned with revenue attainment, not just minimizing cost.
They also make proactive and targeted use of AI technologies to improve execution speed, including through AI-driven scenario planning. More than three-quarters are implementing system-driven recommendations, or even outright automated decision-making.
Building cross-functional visibility — and to some extent unifying incentives across those functions — has ensured that everyone is rowing in the same direction.
These focused efforts to reduce the time between signal and response are paying off. Leaders are substantially more likely to capture 70% or higher full-price sell-through than the rest of the sector.
Where growth potential sits today
Even for leaders, opportunity remains. The survey results uncovered three critical areas for all retailers to prioritize:
- Upstream adjustments to supply and downstream adjustments to in-market inventory should be driven by market and demand signals, not lengthy, calendar-based planning cycles. Retailers must invest in execution mechanisms that maintain the pace of their signal capture and decision speed.
- Planning infrastructure is largely hybrid, suggesting a patchwork approach that reinforces disconnection between functional teams and processes. Consolidating the technology foundation where possible unifies data, insights, and decisions.
- Confidence in AI’s potential is near-universal, but adoption remains very low. While around 80% of the retailers in our survey asserted the importance of AI, the level of deployment lags at around 25%.
To become AI-ready, businesses must follow through on interest. Investments should focus on the capability areas most likely to impact the drivers of the latency tax: integrated planning, demand forecasting, inventory optimization, and exception management.
Align every decision to opportunity
The survey results are clear: to be successful in modern retail, response time is critical. The retailers that reduce latency to match the speed of decisions and execution to the rate of market change are selling more — and more at full price — while reducing lost sales.
This capability requires continuous, agile, AI-driven planning that is aligned to shifts in the market.
By accelerating their responsiveness to changing dynamics, retail planners can eradicate the slow or poor decision-making that leads to a loss of as much as five cents for every hard-won dollar.
Unified planning ties strategy to execution
Retailers need to move to planning processes that are continuous, dynamic, and iterative. Solutions like Anaplan for Retail Planning align planning across functions and embed AI into decision-making so teams can:
- Automatically surface best practice recommendations to address anomaly alerts
- Collaborate across teams with one source of truth to enable enterprise-wide planning
- Run fast, scenario-based “what-if” modeling to support decisions
- Secure rapid approvals on urgent changes
- Empower business units to act independently, while staying aligned
- Elevate only high-impact trade-offs to executive review