Scaling requires more than great marketing
If you are fortunate to create a brand that people love with products they want to buy you will face the exciting challenges of scaling. Product development, sales, marketing, customer experience and logistics are always critical business drivers but you will also discover that forecast accuracy, inventory turns and effectively managing your supply chain are also key factors in a brand’s ability to scale.
The critical impact of forecasting and supply chain logistics for a DTC e-commerce business cannot be overstated.
If inventory is inadequately positioned you may be forced to choose between decisions that are less than ideal. If sales are over-forecasted cashflow can be challenged because your capital is in the warehouse. If sales are under-forecasted cashflow also can be strained because you can outgrow your capital. Disciplined, coordinated & controlled growth that has alignment between Revenue, Operations & Finance should be the goal of the brand.
Most of us strive to forecast into our company’s Goldilocks zone. That magical place where inventory is turning at the optimum speed. That place of high-performance where demand planning, manufacturing, logistics, customer experience, finance and marketing are all smiling. Achieving this consistently requires the expertise and ongoing diligence of the entire company.
The challenge many face in the DTC e-commerce model comes from operational timing differences in the core processes of the business.
Each of these core functions have a uniquely timed cycle in a business. Depending on the complexity of your product line(s) you may be managing multiple cycles within the same business process. There is not a silver bullet solution for managing this process. There are many software solutions to assist in this process and there are highly skilled experts to assist in this process. Champion this process to your team; build it into the fabric and culture of the company. It needs to become a company core competency. Your brand makes products for your customers; this process is critical to meeting your customers’ needs.
Here are a few recommendations from what I have learned so far:
Visualize your core business cycles (and their timing) for all stakeholders
Literally create timelines and charts
Define your tolerance levels for:
Inventory (value on hand, DSI, aging, etc.)
Expedited logistics costs
Discounts and liquidation
Capital (equity or debt)
Create your team
Define ownership on key decisions along with communication and reporting for when they are made.
Decentralizing this process to the team is critical; leaders and disciplines throughout the brand will be required to make this work
Establish regular updates and in-person meetings to review
Establish real-time reporting with triggers
What are your time fences for each decision?
When does a sales anomaly become a sales trend and force a change in forecast?
Invest in an ERP with demand planning capabilities and team members who are experts.
Dashboards and data are critical, but the timeliness, interpretation and action steps taken on data are even more critical
Document your plan and policies
Recognize that a “one-size fits all” forecasting method may not be appropriate for your entire product line.
I have found that forecasting accuracy and supply chain management has the ability to both fuel and stifle growth. As your brand gathers momentum and funnels truly become flywheels the business will require more diligence in this area. The more a team understands and participates in this process the more alignment and efficiency the business will perform with.
My encouragement to you to learn and develop this skill personally, but to strive to have your team learn to function in this process together.