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6 seasonal index mistakes you don’t want to make

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We all know snow shovels aren’t going to sell in the summer and beach towels will flop in December. Most of us can identify general seasonality and spot a really bad seasonal index by applying simple common sense. But do you frontload your key seasons or reduce orders because your replenishment system doesn’t quite get the job done?

Published in: Retail
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6 seasonal index mistakes you don’t want to make

  1. 1. Copyright Data Profits 2015 6 Seasonal Index Mistakes You Don’t Want to Make
  2. 2. Do you frontload your key seasons or reduce orders because your replenishment system doesn’t quite get the job done? Copyright Data Profits 2015
  3. 3. Do you frontload your key seasons or reduce orders because your replenishment system doesn’t quite get the job done? You might be running into these common seasonality issues that cause retailers big headaches. Copyright Data Profits 2015
  4. 4. Copyright Data Profits 2015 Promotions and Clearance
  5. 5. Your demand forecasting or replenishment system doesn’t separate off-price sales from regular-price sales. Copyright Data Profits 2015 Promotions and Clearance
  6. 6. Your demand forecasting or replenishment system doesn’t separate off-price sales from regular-price sales. This causes your system to see false seasonality due to ads or overstock markdowns. Copyright Data Profits 2015 Promotions and Clearance
  7. 7. Copyright Data Profits 2015 Promotions and Clearance 0 100 200 300 400 500 600 700 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Regular Sales Promo sales Sales for Item A
  8. 8. Copyright Data Profits 2015 Promotions and Clearance 0 100 200 300 400 500 600 700 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Regular Sales Promo sales Index with Promo Sales for Item A Do you really want to forecast those promo sales?
  9. 9. Copyright Data Profits 2015 Promotions and Clearance 0 100 200 300 400 500 600 700 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Regular Sales Promo sales Good Index Sales for Item A Or forecast without promo?
  10. 10. Copyright Data Profits 2015 Lost Sales
  11. 11. The demand forecast does not include lost sales in the calculation. Copyright Data Profits 2015 Lost Sales
  12. 12. Copyright Data Profits 2015 Lost Sales 0 200 400 600 800 1000 1200 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Beach Towel Sales Regular Sales Lost Sales
  13. 13. Copyright Data Profits 2015 Lost Sales 0 200 400 600 800 1000 1200 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Beach Towel Sales Regular Sales Lost Sales Don’t lose these sales next year!
  14. 14. Copyright Data Profits 2015 Moving Holidays
  15. 15. Your seasonal indexes rely on sales occurring in the same week every year. Copyright Data Profits 2015 Moving Holidays
  16. 16. Your seasonal indexes rely on sales occurring in the same week every year. What happens when Easter moves every year? Copyright Data Profits 2015 Moving Holidays
  17. 17. Copyright Data Profits 2015 Moving Holidays March April
  18. 18. Copyright Data Profits 2015 Moving Holidays March April
  19. 19. Copyright Data Profits 2015 Moving Holidays March April
  20. 20. Copyright Data Profits 2015 Moving Holidays March April
  21. 21. Copyright Data Profits 2015 Moving Holidays March April
  22. 22. Copyright Data Profits 2015 Moving Holidays March April Your system can’t catch me!
  23. 23. Copyright Data Profits 2015 Changing Weather Patterns
  24. 24. Snow shovels and ice melt only sell when it starts to snow. Copyright Data Profits 2015 Changing Weather Patterns
  25. 25. Snow shovels and ice melt only sell when it starts to snow. If your system is relying on last year's sales, you may miss the early snowstorm or load up for snow that never comes. Copyright Data Profits 2015 Changing Weather Patterns
  26. 26. Copyright Data Profits 2015 Changing Weather Patterns
  27. 27. Copyright Data Profits 2015 Changing Weather Patterns
  28. 28. Copyright Data Profits 2015 Changing Weather Patterns
  29. 29. Copyright Data Profits 2015 Changing Weather Patterns
  30. 30. Copyright Data Profits 2015 Changing Weather Patterns Too soon??
  31. 31. Copyright Data Profits 2015 Forecast Smoothing
  32. 32. Some demand forecasting systems try to smooth forecasts into pretty seasonal curves. Copyright Data Profits 2015 Forecast Smoothing
  33. 33. Some demand forecasting systems try to smooth forecasts into pretty seasonal curves. Smoothing takes some of the in-season sales and redistributes them to out-of-season weeks. Copyright Data Profits 2015 Forecast Smoothing
  34. 34. Copyright Data Profits 2015 Forecast Smoothing 0 200 400 600 800 1000 1200 1400 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Beach Towels Regular Sales
  35. 35. Copyright Data Profits 2015 Forecast Smoothing 0 200 400 600 800 1000 1200 1400 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Beach Towels Regular Sales Smoothed Forecast
  36. 36. Copyright Data Profits 2015 Forecast Smoothing 0 200 400 600 800 1000 1200 1400 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Beach Towels Regular Sales Smoothed Forecast Do you want to buy beach towels in January?
  37. 37. Copyright Data Profits 2015 Forecast Smoothing 0 200 400 600 800 1000 1200 1400 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Beach Towels Regular Sales Smoothed Forecast Do you want to buy beach towels in January? Are you going to buy enough in June?
  38. 38. Copyright Data Profits 2015 Too Broad
  39. 39. Copyright Data Profits 2015 Too Broad The same seasonal index is applied to many locations and products.
  40. 40. Copyright Data Profits 2015 Too Broad The same seasonal index is applied to many locations and products. Unfortunately, this leaves Texas and Wisconsin stores with snow shovels at the same time.
  41. 41. Copyright Data Profits 2015 Too Broad
  42. 42. Copyright Data Profits 2015 Too Broad
  43. 43. Copyright Data Profits 2015 Too Broad
  44. 44. Copyright Data Profits 2015 Too Broad Why do I have these?
  45. 45. Copyright Data Profits 2015 Too Broad I need more!
  46. 46. Fixing even one of these issues could increase your GMROI, lower your average inventory and make your customers happier. Copyright Data Profits 2015
  47. 47. Fixing even one of these issues could increase your GMROI, lower your average inventory and make your customers happier. Unfortunately, many demand forecasting systems make correcting these issues difficult. Copyright Data Profits 2015
  48. 48. At Data Profits we can help you fix your seasonal indexes without all the headaches. Copyright Data Profits 2015
  49. 49. At Data Profits we can help you fix your seasonal indexes without all the headaches. • user-friendly interface • easy-to-read graphs • customizable forecast alerts • easier demand forecasting Copyright Data Profits 2015
  50. 50. All Material Confidential - Copyright Data Profits 2013 Let us help you “ Tighten the Links in your Chain™ ” with better seasonal indexes! Follow us on Twitter or LinkedIn and receive the latest info about tutorials, articles, and more. Copyright Data Profits 2015

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