TOCICO

Several business environments, especially retail and distribuition, enjoy a regular spike in customers flow and demand during very short periods of the year, which are known as seasonality events. Therefore it behooves the company to capitalize on these opportunities. These events are an excellent opportunity to increase sales and margins but carry with it big challenges, notably for a supply chain where the reaction time is longer than the peak period. In that case, which accounts for the vast majority of the distribuition business environments, it’s necessary to “bet” based on a demand forecast for this period. But forecasting implies, by definition, risks (as it is impossible to accurately forecast in an environment where the number of SKUs and stock locations is very big). The usual practice (used by vast majority of the companies) is to forecast (long) in advance of the demand for these events and push the products to the sales locations (stores or warehouses). Despite that during the peak event these environments experience shortages of best sellers and overstocks of slow movers (the vast majority of the product portfolio) which are then liquidated after the event. Therefore the key challenge is “how we can capitalize on the peak events without incurring major risks? How can we maximize ROI? In order to address this challenge we performed an analysis based on actual data of 2012 Christmas event of a Fashion Retail Business in Brazil and we propose a seasonality strategy called “Deep and Narrow”. The analysis contemplates a way for classifying the product portfolio and addressing each type in a different way. We claim that this is a more effective way for answering the question above as it increases the availability of best sellers and at the same time reduce risks of overstocks (and consequently liquidation) of slow movers. In the end we propose a generic S&T tree entity for dealing with seasonality.