Performance Review and Sales Forecasting in Fashion

9th April 2018

 

 

This chart summarizes the merchandise management process.  We will explore aspects of this chart in future blog posts.  This time I want to address performance review and sales forecasting.  Fashion is fast moving.  Therefore, the first level performance review needs to be done weekly.  Ideally every Monday morning. 

Over the weekend the sales data should be processed and reports generated on sales, margin and inventory performance.  One of these will be the open to buy report or the WSSI (weekly sales and stock intake).  The WSSI is open to buy done weekly. 

Once you know the cumulative performance up to yesterday or today (Sunday night in either case), an important step is to re-forecast sales for the rest of the season.  After 4 to 6 weeks trading in a 26 week season, this forecast should start to get tolerably accurate.  In practice the weekly forecast error is not too significant because over the remaining length of the season there is a high degree of forecast errors cancelling one another out.  So if you manage store inventories on a rolling n weeks cover, the only error that matters is the cumulative error over n weeks. 

There are three possible outcomes from forecasting the end of season result: 

  1. The terminal stock target will be reached.  In this case you don’t need to do anything and can move on.
  2. The available stock will sell out early.  Then you will need to look at what has been bought for the next season that can be brought in early.
  3. The season will finish with more terminal stock than you planned.   In this case a common strategy is to force any remaining free stock in the warehouse out to stores, using a method that leaves each store with the same weeks cover, based on their individual rates of sale.  Then you will need to consider markdown strategies that elevate the rate of sale to reach the desired terminal stock targets.

Some merchants believe that you can’t apply this logic to individual options because of the work involved.  However, this is what computers are good at.  If you define your algorithms so that the machines can do the calculations without requiring too much human intervention, the machines are more than capable of doing the work. 

What sort of sales forecasting and performance review works best in your business?  Please post a comment or question. (Please log in/register to enable you to do this.) 

If you’d like more best practice advice check out our sales and inventory management e-learning course.

 

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