The Role of Demand Planning in Fashion Retail.

Technology streamlines and supports the tasks of demand planners in the fashion retail industry, helping to create a more efficient demand planning process. However, there is often a knowledge gap between decision makers and the demand planners themselves when selecting the right technology. Such knowledge gaps are often the result of a lack of in-depth understanding of what the actual demand planning process entails. Since market conditions are constantly changing, the impact on customer behavior adds more unpredictability and complexity to the demand planner’s role.

Our two-part blog series will begin with an overview of a demand planner’s responsibilities. We will then provide an understanding of the potential challenges that demand planners can face, and finally explore how technology can help facilitate the demand planning process. This will enable you to make an informed decision about the technology solutions that best fit your business and team.

Many factors influence products in the fashion retail industry. These include catwalk trends, pop culture, social media and influencers, innovations, technology, and seasons. There is a constant need for production, sourcing, and replenishment of product inventories. This is an industry that relies heavily on complex global supply chains, with many touch points requiring up to date and accurate information to efficiently process demand requirements. Disruptions in a supply chain can result in negative knock-on effects across all business operations – ultimately impacting customer satisfaction and profitability. Unsatisfied demand puts customer retention strategies at risk as customers today have a plethora of options available to them. Put simply, if customers are let down, you run the risk of losing them to competitors. Additionally, this could lead to negative brand image through many ‘feedback & rating‘ forums.

Demand planning is the process of forecasting future customer demand and the operationalization to make it all happen. It takes the forecast and ensures that all key components of the supply chain operate accordingly, efficiently, and at least cost possible. It includes a supply chain management process to ensure that the right quality of products are delivered at the right time to satisfy customers. The goal is to avoid surplus stock and insufficient stock as these may lead to either, exit stock strategies which impact margin or loss in sales, customers and market share.

Demand planners monitor the market, understand customer behavior across all channels, know their supply base (and related variants such as lead time), and are clear on all planned business campaigns such as promotions and events, whilst focusing on budgetary constraints. They collaborate with a range of teams – such as supply planners, distributors, sales, marketing, and data teams.

A demand planner would typically:

• Perform statistical analysis based on real-time data to predict future demand for products and adjust their forecasts with new market information as required to create demand plans. Data is crucial to the entire demand planning process.
• Perform forecasts at aggregated product levels – new/continued products, core products, product departments by supplier, season, etc. Review these forecasts with the relevant channels or partners.
• Ensure that all omnichannel sales streams have sufficient stock of each product and that they are delivered within feasible timelines. Understand any supply chain constraints that will affect the smooth functioning of business operations.
• Assess forecast accuracy by studying previous planning activities and historical data on customer orders, stocks, and shipments. At times, they may have to correct historical data based on anomalies.
• Add all new products, adjust any product groups if needed, and deactivate products that are no longer part of forecasts (such as discontinued or end-of-season products) from inventory lists.
• Plan for dependent demand (the demand for the different components of a finished product) in the case of product bundles and configurable products.
• Gain approval for demand plans from management.

A demand planner’s job is a complicated one – highly dependent on customer demand, market conditions, supply chain, business strategy, accurate real time data and collaborative work streams across the business.

Today, some of these tasks are still being performed manually. Technology solutions focus on this cross-functional process to help retailers meet customer demand more effectively through a streamlined systematic approach which enables the demand planner to make complex decisions easier and quicker, with real- time data input. This will help provide clear, timely visibility to all key parties across the business, thus enabling better collaboration and output, and ultimately leading to:

• Resource time efficiency (demand planner and everyone involved)
• Lower inventory costs
• Decrease in out of stocks
• Reduction in excess stocks
• Improved on-time, in-full delivery
• Drop in the need of expedited shipping costs
• Better suppliers pricing
• Greater customer satisfaction / retention
• Strong brand image through reviews and ratings
• Profitability

Before we deep-dive into the benefits and features of technology solutions, we must develop an understanding of specific challenges that a demand planners face. These include data collection from multiple sources and analyzing it for accuracy and consistency, and getting the wider team’s buy-in once demand plans are approved. The upcoming blog in this series will discuss some of these challenges in depth, and explore how demand planners can leverage new technologies to overcome some of the key issues in demand planning.

Written by:
Vimmi Golding
Business Analyst, Fortude