How can new product forecasting be improved?
According to a study from Martec International and Relex, the biggest challenge for North American retailers regarding forecasting is around new products.
A whopping 73 percent of North American retailers cited new product forecasting as a challenge, notably above the response from overall global retailers at 58 percent. The study was based on 126 interviews across North America (Canada and U.S.), Germany, U.K. and Nordic countries (Denmark, Finland, Norway and Sweden).
“The U.S. tends to be the country where most new products are developed and launched and so this causes greater problems for North American retailers than elsewhere,” Martec noted in its study.
Among the supply chain challenges involved with new product forecasting noted in the study for all retailers:
- Only 42 percent are able to show new product pipeline stock build in their supply chains;
- Only 39 percent are able to automatically allocate new products within desired business requirements;
- Only 29 percent can build new product demand forecast automatically at SKU/store level.
Other major forecasting challenges for the North American retailers surveyed include weather, cited by 64 percent, and promotions and seasonal items, both 52 percent.
With estimates of new product failures at between 50 percent and 80 percent, the challenges aren’t surprising.
New product forecasting is plagued by a lack of product history or an uncertain product life cycle. While products creating new categories are the hardest, gauging demand for extensions to existing products or refinements (i.e., “new and improved”) also face major hurdles.
Some sophisticated software that better clusters and reviews past new product introductions are promising to improve new product forecasting. Tapping social media’s reach and predictive analytics, enhanced consumer survey methods are likewise promising to better predict demand.
First Insight, for example, surveys consumers to predict which fashion styles will perform well for particular retailers. Founder Greg Petro recently told Women’s Wear Daily that new-product forecasting “requires educated risk-taking.”
- State of the Retail Supply Chain 2016 – Martec International
- Martec & Relex Solutions Present ‘State of the Retail Supply Chain 2016’ – Relex
- Demand forecasting for new products? Many heads are better than one! – TIAS
- First Insight’s Greg Petro Explains the Importance of Data – Women’s Wear Daily (sub. required)
DISCUSSION QUESTIONS: Do you see enhanced software or survey methods improving the ability to forecast new products? How much will retailers continue to rely on intuition and hunches when attempting to predict new product demand?