No stock planning for Q4 yet? This is the way to catch up!

Author: Matthijs Onland, country manager NL & BE at Wayflyer

During the last 2.5 years we have gone through all sorts of changes worldwide. The digital transformation also accelerated as a result of the pandemic, and all the knowledge we thought we had about online shopping turned out to be no longer sufficient. The e-commerce sector was hit by supply chain disruptions and delayed deliveries became the order of the day. Many companies were able to overcome these challenges by pre-arranging their purchases and adapting marketing campaigns. Fast forward to the summer of 2022, we know it for sure: As an e-commerce entrepreneur, you are doing the stock planning for Q4 now. What awaits eCommerce entrepreneurs and how can they best prepare for this?

In the year 2022, getting a warehouse order filled by the manufacturer and shipped to the customer requires a lot of patience and thorough planning from e-commerce entrepreneurs. Stories of how an order was placed at the factory in China in December and the goods did not arrive until May – five months later and much longer than the expected two months for an order to be fulfilled – are common.

It was already predicted that this year would be full of inventory management challenges for eCommerce entrepreneurs, all of which have come true. As we enter the peak season in the fourth quarter, it is important to plan ahead to navigate increasingly complex logistics. After all, there are opportunities to meet these challenges and respond to customer demand. Two dates are marked in red: Black Friday and Christmas. Both decisive in relation to sales figures and the companies’ success.

So e-commerce entrepreneurs don’t have to wait any longer to start inventory planning for Q4 and the holidays! They should now start forecasting sales and placing stock orders. In this way, they can anticipate any problems in the supply chain.

Supply chain challenges beyond your control

Many supply chain risk factors cannot be controlled as an entrepreneur, but they can and will delay order processing during the busiest time of the year. Where it used to be possible to wait until October to place orders for the holidays, it is now impossible. In contrast, operators who wait are at high risk of shipping delays and loss of production slots at the factory.

Here’s a summary of the key supply chain challenges already impacting inventory planning in Q4:

  • Delayed deliveries still unsettled: According to Supply Chain Dive, the outlook for the global shipping industry is not expected to improve this year. In fact, industry stakeholders expect the backlog to continue into 2023.

  • The war between Russia and Ukraine is also disrupting freight transport: in Europe, rail freight appeared to be a viable alternative to shipping. According to Bloomberg, rail transport to Europe from a port in China grew by 70% in the first two months of the year. But then came Russia’s war with Ukraine. Now one of Europe’s largest freight forwarders no longer accepts rail freight from China to Europe. Even if an e-commerce business has never considered rail freight before, it can still have consequences. If freight forwarders instead switch from rail to sea, it will only lead to more congestion in shipping.

  • Factory closures remain a problem: During a recent spike in COVID cases, the Chinese government forced several factory closures, particularly in the Shanghai region. So the risk remains that as the number of COVID cases increases, local shutdowns will affect the region where your factory is located. For example, entrepreneurs will again have to deal with production delays and loss of production space.

As supply chain challenges pile up or expand, the time frames that would normally be sufficient to order supplies and deliver them to customers are extended. Delays of four to five months are simply too long to meet demand in the 4th quarter, and if inventory is not in order, sales will suffer.

Furthermore, eCommerce entrepreneurs risk more than just fewer sales opportunities. When a back order is placed, the dealer or retailer wants it immediately to fill shelves and collect money. A dealer will not be willing to wait months for orders to be fulfilled. This puts entrepreneurs at risk of damaging their stakeholder relationships if they don’t have enough inventory – especially as the end of the year approaches and store traffic is upbeat.

While ongoing supply chain challenges remain, entrepreneurs can take steps to make their business more resilient. So prepare good stock planning for a successful 4th quarter, in order to have sufficient stock for your own customers and business partners. In addition, by leveraging alternative financing, entrepreneurs can cover the costs associated with inventory build-up – without dilution and with more flexible repayment options.

Accurately predict customer demand

Before entrepreneurs can order their inventory for the fourth quarter, they need to know how much inventory is enough. To do that, business owners must take the right steps to accurately forecast customer demand for the rest of the year. This is the only way they can place stock orders that match.

If direct-to-consumer (DTC) is the main channel, you can look back at data from previous holiday seasons to discover recurring trends and order volumes. Entrepreneurs can also look at sales data and trends throughout the year to predict what demand will be and determine how much growth they could have annually.

It is also important to consider the influence of marketing and consider metrics such as customer acquisition costs and return on ad spend. After all, an increase in sales can happen by investing in marketing channels such as paid search or placing Facebook ads. As ad spending increases as the holiday season approaches, it is important to factor this potential increase into the forecast.

Finally, entrepreneurs should not overlook other channels through which they sell, such as Amazon and B2B partners. Companies that order in bulk from eCommerce entrepreneurs for their promotional gifts, for example, usually wait until Q4 to place those orders. When entrepreneurs wait for companies to place these orders, it is simply too late to fulfill them. So contact partners at the latest by the end of 2. quarter or the beginning of 3. quarter and let them know you are working on year-end stock orders. Start the conversations now and ask how much inventory they think they will order for the holidays.

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