Retailers: Recalibrate for the Year Ahead by Looking Back at Your Data

The best way to recalibrate and face the uncertainty of what the year ahead will bring is to ground yourself in data, use it to optimize your warehousing and logistics processes, and, if possible, leverage emerging technology to make it run more efficiently.

Set a New Year’s Data Resolution
Planning for inventory in 2023 should look similar to pre-pandemic years with the caveat that you will need to tweak and adjust according to the trends that emerged as the ripple effects settled this year. In other words, if you’re not in a vertical that is still reeling (i.e. automobiles), inventory planning should be based on a combination of pre-pandemic trends and what you saw in H2 of 2022.

If the thought of trying to analyze data from three years ago feels like an impossible obstacle, you’re not alone. There are so many disparate data points to consider in logistics, they often live in disparate places, and trying to gather them into a singular destination, organize them so they’re meaningful, analyze them so they’re actionable, and save them for future planning purposes is no small feat.

If historically your organization struggled with the above, now is the time to make a New Year’s data resolution. A good approach is to focus on key areas you want to improve - are you trying to cut down on delivery times? Use a smaller fleet? Decide which data points are going to be the most informative for making decisions about those improvements, where you’re going to collect them, and how you’re going to save them for future use.

Data regarding product demand should obviously be on the list, but you could also consider things like traffic, GPS, and road conditions. As far as where and how you’re gathering that data into a single place, you can either build your own software unique to your needs or invest in a software solution. Obviously, the best choice is going to be dictated by your budget and resources - building your own means a lot more freedom to design around your needs, but it’s also much more expensive and requires ongoing maintenance.

Whether you build your own or buy a solution, gathering and analyzing the right data is the best way to make informed decisions about the year ahead.

Warehouse Optimization Over Expansion
While the past two holiday seasons inspired many to overstock their warehouses in attempts to game a broken system, this move is far too costly to keep up with. Let’s leave last-ditch survival in 2022, and move into 2023 with data-driven optimization as our guiding principle.

Warehouse expansion may be in your best interest, but considering the potential for a recession, it’s probably not. In either case, the best way to know is to dive into the data surrounding your demand. What products are in demand, where, and when? Having these historical insights can help you reorganize your warehouse(s) in order to more efficiently meet that demand.

For example, let’s say you’re a petcare retailer and until now you’ve kept your inventory siloed. One warehouse for food, another for toys, and a third for furniture and other accessories. If you look at the trends regarding what, where, and when your customers are ordering your products, you may find that your best solution is actually to un-silo your inventory and turn those 3 warehouses into their own regional distribution centers that include all categories of products according to demand. This could save major time and money when it comes to logistics costs, especially when considering last-mile delivery.

If, on the other hand, you analyze your data and expanding into more space is truly what is demanded, consider options like renting or sharing spaces in order to minimize risk. There is obviously nothing inherently wrong with expansion, I’ve just seen many customers mistake it for optimization. Let the data be your guide.

Automation Allows You To Do More With Less
Although the boom of e-commerce during the pandemic has died down, it continues to follow its predicted growth path and it’s certainly not going anywhere. Consumer expectations are heavily influenced by the likes of Amazon Prime’s next-day delivery, but more importantly, by the visibility they have into the processes - there are emails, clear tracking timelines, and even a text with a photo from the driver when things have been delivered.

SMBs can’t beat Amazon at their own game, but they can take a page out of their playbook. Utilizing automation makes it possible to do more with less. All that data we discussed earlier, if you feed it into the right algorithm and apply machine learning, it can tell you how to make your routes faster, your fleets leaner, and how much time it’s going to take from warehouse to door. Despite the upfront investment costs, it’s going to save your organization a lot of money in the end.

If there is anything the massive supply chain crisis of the last two years has taught us, it’s that logistics is ripe for this kind of disruption and in desperate need of more transparency. When planning for the usual day-to-day disruptions of the year ahead, diversifying your supply chain and having different solutions for different interruptions is one way to avoid major slowdowns. However, when those big events happen that are outside of your control (and they will), the best thing you can do is communicate with your customers. Giving them visibility into the process will let them know they’re still a priority. Automation can take on that kind of complexity, making everyone’s job easier, and resulting in a happier customer, which is the real end goal.

We can use these algorithms to predict what’s likely to happen in the year ahead, but just like weather forecasting, there are always going to be some unlikely surprises. However, having the right data and optimizing according to the insights it can give you will create a stronger overall business, and the stronger the business, the easier it is to weather whatever storms come your way.