How to avoid Christmas stockout at the store level?

Filed in archive Point of view on December 24, 2007

Christmas period is coming again and also the wave of the news about stockout of different range of products; The newest one was about last week:

george harrison, senior vice president for marketing, Nintendo of America, commented about the recent stockouts and said that the shortage has occurred because Nintendo must plan its production five months ahead, and projecting future demand is difficult.

A number of researchers have studied this problem and have developed some basic strategies to attack stockout problem. Some solutions according to Yossi Sheffi of MIT include:

- Companies can analyze POS data for an initial period of a product introduction and get an early indication of subsequent demand. A CTL research team did this for shoes, and was able to improve the demand forecasts for the mix of colors and styles that the manufacturer was selling.

- Another option is to test the product in a small group of outlets to sample demand before triggering a full roll out. Companies can delay full distribution until they have these early indicators, or split production into smaller runs to give more flexibility.

- They can also use postponement, a strategy that postpones the final configuration of a product in the manufacturing process until better demand information is available.

- A further option is to improve forecasting by analyzing the POS demand pattern for the last selling season, paying special regard to the volume of product that was sold at marked-down prices.

It's important to note that in each of the above mentioned scenarios, POS data is really important because the true demand picture will not be revealed only by shipment numbers.