Being able to understand and predict how much of a product will sell plays a crucial role in the success of any inventory-based business. All businesses in the supply chain function based on inventory sales, and for things to run smoothly, these sales need to be well-understood and anticipated. While there are certain practices and tools which can help predict and anticipate sales, there are also cases of unusual sales which are important to understand.
What exactly are unusual sales? Usual sales can be defined as when either large quantities or small quantities of stock are sold. Identifying unusual sales and understanding them is crucial for inventory-based businesses, because they can reveal a lot about the state of the customer’s business and their buying habits and can prevent service issues to customers.
In the terms of an inventory-based business, unusual sales refer to specific outlier sales events. Typically, it means either a large quantity of products is sold, or a small quantity of products. The definition of “very large” and “very small” differs from business to business, depending on what your typical probable sales quantities are.
What are some examples of unusual sales? We can give two real-world examples, which you might already be aware of. During the coronavirus pandemic, there was suddenly a “soaring demand” for personal protective equipment (commonly called PPE), as customers “scrambled to obtain items” like disposable masks, face shields, and medical gloves. This surge led to “serious supply shortages,” as demand for these items rapidly jumped by more than 300% in some cases.
On the other end of the spectrum is a related scenario: during the pandemic, when the quantity of certain items sold to the hospitality industry rapidly declined, as these businesses shut down, or operated at a limited capacity. This can be observed in the fact that many food industry vendors (including distributors and point-of-sale providers) reduced their workforces, conducted layoffs, or shut down completely. One study found that the demand for restaurants in the US fell by 60% during this time.
While these examples of unusual sales are extreme cases, they demonstrate what these scenarios might look like in the real world. But it’s important to note that there’s typically a challenge when it comes to most other cases of unusual sales: their cause might not be known. In the examples above, we know exactly why these sales trends occurred, because they happened during the coronavirus pandemic. But in most cases of unusual sales, it might not be clear why exactly they’re occurring.
While unusual sales are usually noteworthy events on their own accord, they can also be symptoms of underlying conditions in your customer’s business. Because of this, it’s crucial for inventory-based businesses to know what unusual sales look like in their own business, to understand what they might mean and to take steps to mitigate unusual sales. We’ll dive into all of that in a moment, but first, we’re going to discuss what unusual sales might mean.
Because these sales events involve significant quantities, they oftentimes reflect a change in your customer’s business that you should be aware of. Reasons for unusual sales can include:
There are many benefits for understanding unusual sales in your own inventory-based organization. Firstly, knowing when these sales are likely to happen and identifying their cause can help you understand what is happening in your customers’ organizations. For example, if your customer is buying far less inventory because they’re being overcome by a competitor in the market, your organization can be forewarned of their status. Similarly, if your customer is experiencing explosive growth, you use insights from unusual sales to be prepared for a higher volume of stock needs in the future, instead of being caught off-guard and experiencing stock outs and long lead times.
Unusual sales can also be used to adjust historical sales, in the interest of improving forecasts. When they’re not understood and anticipated for, unusual sales could potentially lead to forecasting errors. But when these sales are taken into account in demand forecasting, they can be used to create better-informed (and therefore more accurate forecasts).
Understanding unusual sales is also crucial for preventing service level issues to customers. That’s because information about these sales can be used to anticipate future needs, prevent stockouts, reduce planning cycle time, and improve operations overall.
Unusual sales are bound to happen, but how they impact your inventory-based business is yet to be determined. Here are some ways to mitigate the impacts of unusual sales in your organization:
In every business, an “unusual sale” means something different. To best understand these events and manage the impact of them, it’s best to clearly define what would be considered an unusual sale in your business. You can do this in terms of standard deviation, which directly correlates to the probability of it happening. This can be done easily with certain supply chain planning tools, such as StockIQ.
What is your unusual sale trying to tell you? By understanding the root cause of this event, decision-makers can learn insights about their customers, and be best prepared for future stock needs. To understand what unusual sales represent, you can look at other sales data, speak with your customers directly, and keep an eye out for any news events (such as market fluctuations or shifting consumer habits).
When it comes to managing inventory sales, visibility is like a secret weapon. When you have precise insights, data, forecasts, and analysis, you’re far better able to understand all your inventory needs – including unusual sales. As it turns out, many businesses don’t have excellent supply chain visibility, with 45% of businesses saying they have limited supply chain visibility. Using tools which give you full insights into your operations can lead to many benefits, but it can also help with managing unusual sales.
If you regularly communicate with your customers, and you have a good working relationship with them, you might have advanced warning of unusual sales. For example, if you have effective communication practices with a customer who is experiencing a severe shift in consumer demand, they can give you advance warning about their changing inventory needs.
When it comes to unusual sales, the best way to be prepared for them and to manage them when they occur is to use supply chain planning tools which give you full visibility and insights into your operation. StockIQ is a supply chain planning suite that gives you tools for forecasting, replenishment planning, inventory analytics, supplier performance, promotion planning, and S&OP Improvement.
It’s designed to give you answers and insights, instead of just data, and it can help you reduce stockouts and planning cycle time, improve operations, and offer an overall better level of service.
Find out how StockIQ can help you manage unusual sales with ease, contact us today.