WHAT’S THE RIGHT LEVEL?
The skies are clearing on the global storm that was COVID-19. Norms are returning and the supply chain is returning to normal for many raw materials. Most products that faced severe shortages are back on the market, the national diesel fuel situation is behind us, and truckers are in abundance.
Now that the supply chain is normalizing, distributors and other business owners are faced with looking to and preparing for a post-COVID future. With the sales data heavily skewed due to the last few years of abnormality and, at some points, panicked buying and selling habits, plus the choice in products changing drastically, forecasting inventory and a profitable product mix has become an almost impossible task.
In order to help you navigate this complicated road back to ‘normal’, I have compiled a few tips and tricks to find the right level of inventory and make sure you have the most optimal product.
Step 1: Normalize your historical sales data that includes COVID years
Normalizing the historical sales data gathered during the COVID-19 pandemic can be challenging because the pandemic caused significant disruptions to consumer behavior and market conditions. However, there are some approaches that can help you to normalize your sales data:
- Adjust for seasonality: If you have historical sales data, you can compare your current sales figures to the same period in previous years to adjust for seasonality. This will help you to identify whether any changes in sales are due to COVID-19 or other factors.
- Compare to industry benchmarks: Compare your sales figures to industry benchmarks to see how your business is performing relative to others in your industry. This is so you can identify whether any changes in sales are due to COVID-19 or other factors.
- Analyze changes in customer behavior: The pandemic has caused significant changes in consumer behavior, such as new demand for certain types of products. Analyzing these changes can help you to understand how the pandemic has affected your sales.
- Use a rolling average: If you have data for a period of several months, you can use a rolling average to smooth out any fluctuations in sales due to short-term factors. This allows you to identify longer-term trends in sales.
- Compare to pre-pandemic levels: If your business was operational before the pandemic, you can compare your current sales figures to pre-pandemic levels to identify how much your sales have been impacted by the pandemic.
Step 2: Forecast for Inventory Planning
Forecasting inventory needs is an essential part of supply chain management. Here are some steps to help you forecast for inventory needs:
- Analyze sales data: Look at your historical sales data that you have now normalized. Identify trends and patterns in sales that will help forecast future demand and identify which products are likely to sell well in the future.
- Consider seasonal factors: Take into account seasonal factors that may impact demand for your products.
- Monitor market trends: Stay up to date with market trends and changes in consumer behavior that will help you forecast changes in demand and adjust your inventory levels accordingly.
- Consider lead time: Take into account the lead time for ordering and receiving inventory.
- Collaborate with suppliers and customers: Collaborate with your suppliers to ensure that they can meet your inventory needs and work with your customers to get any notice possible of upcoming materials they may need.
Step 3: Re-evaluate your product Mix with COVID in mind
Figuring out if you are selling the right product mix, especially now that we have entered a post-COVID landscape, requires a thorough analysis of your sales data and an understanding of your target market. Here are some steps you can take to assess your product mix:
- Analyze your sales data: Look at your sales data to identify which products are selling well and which ones are not. Analyzing your sales data can help you to identify any trends or patterns in customer buying behavior and which products are the most profitable.
- Conduct market research: Conduct market research to understand your target market’s needs and preferences. This can help you to identify any gaps in your product mix and which products are in high demand.
- Analyze your competitors: Analyze your competitors’ product offerings to identify any gaps in your product mix. Look at which products are selling well for your competitors and which ones are not.
- Assess your product profitability: Assess the profitability of each product in your product mix. Some products may be selling well, but if they are not profitable, then are they worth keeping in your product mix?
- Consider your brand image: Consider your brand image and whether your product mix aligns with your brand values and messaging.
- Seek customer feedback: Seek feedback from your customers to understand their satisfaction with your product mix. This can help you to identify areas for improvement and which products are resonating with your customers.
Overall, normalizing sales data gathered during the COVID-19 pandemic, as well as forecasting and seeing if your product mix needs readjustment requires careful analysis and consideration of the unique factors that have affected consumer behavior and market conditions. By using a combination of approaches, you can gain a better understanding of each of these factors, and use these tools to adjust for the ‘new normal’ of post-COVID.
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