The objective:
To increase forecast accuracy of top-line sales as well as Amazon purchase orders.
The context:
With such unprecedented conditions, forecasting sales in and beyond the dynamic market of 2020 has been difficult for brands. In addition, companies have had to find a better way to manage the resulting dramatic fluctuations in purchase orders from major vendors such as Amazon.
The approach & insights:
Even before the pandemic, our client’s business was seeing strong YOY growth in sales. Once the pandemic conditions impacted the market, sales for both their product and the product category overall skyrocketed. However, purchase orders from Amazon had taken a dramatic swing. Fluctuations in demand at the end of the supply chain were now causing larger fluctuations upstream. Fulfilling purchase orders became an allocation struggle across sales channels.
The results:
The Tradeswell forecasting algorithms gave the manufacturer access to real-time insights and sales forecasts from the SKU-level up to the total business. Forecast accuracy improved from 25% to 70% by using the Tradeswell automated solution.
Tradeswell was able to show the company that they needed to factor in Amazon’s current inventory levels in terms of weeks of supply when forecasting purchase orders. This allowed them to assume target weeks of supply for Amazon (around 7), and build that into their assumptions for purchase orders in the short term.
What’s next:
Ecommerce is a new industry after the pandemic, with considerations like competitor stock-outs and price matching continuing to drive wild fluctuations in demand. However, there are still incremental gains to be had - even with uncertain supply chains. Analysis of the client’s last month revealed nearly 40% of advertising spend had a negligible or negative incremental ROI (iROI) which meant the client was spending on inventory that was not moving. At the same time, other products and campaigns offered excellent iROIs, creating an opportunity to regularly reallocate the budget as demand shifts in order to maximize incremental returns and move the inventory dynamically.
Brands, like this one, must be increasingly nimble enough to understand these fluctuations down to the campaign and SKU-level while being able to forecast and plan accurately, both for the short- and the long-term.
Want to find out how your brand can be more nimble? Get started with Tradeswell today.
