Retail management software provider Evant has listed the top five pitfalls for implementing a successful inventory management and supply and demand forecasting project.
According to Evant chief scientist Dr Calvin Lee, the first problem is lack of integration. Often, retailers' and suppliers' systems are incompatible, which hampers collaborative planning. Lee recommends adopting Extensible Markup Language (XML), which allows data to be translated easily between systems.
The second pitfall - dirty data - is where minor inaccuracies in raw data affect forecasts. Retailers must regularly cleanse their data to keep forecasting accurate.
The third area identified by Lee is the explosion of SKU data for retailers to manage. Lee warns that scalability must be considered when implementing optimisation solutions to cope with unseen increases in product lines.
Lee also highlighted the problem of SKU replenishment. Using simple product categories to manage replenishment means that retailers can fall foul of demand uncertainties. Spikes in demand, criticality of the product and contingency plans should the supply chain fail need to be included in planning projects.
The final pitfall, known as the bullwhip effect, is where demand data becomes distorted as it travels up the supply chain, resulting in unnecessary safety stock levels. Lee recommended using algorithms to cut out multiple entries that contribute to this effect and cause overstocking.