How to Minimize Inventory Liability by Managing Promotional Forecasts

The forecast accuracy of promoted products varies because each promotion has a different effect depending on the media used, seasonality, demographics, and competitor’s promotional strategy, among others. This article outlines the way to identify items that are consistently over- or under-forecasted and associated corrective strategy. It also shares OfficeMax’s experience in this endeavor. VIVEK PANDEY | Mr. Pandey is a Senior Demand Planner at OfficeMax. Prior to that, he served as a Senior Forecast Analyst at Lowes. He holds a Master s Degree in Industrial Engineering & Management from Oklahoma State University. M M ost retailers in today’s economic environment use promotions to meet their sales, margin, and inventory turn goals. The effectiveness of a promotion depends on a myriad of factors, such as promotional media (print, direct mail, etc.), type of deal (buy one and get one free, offering at a discounted price, etc.), seasonality (different months have a different effect), product placement (placing an item in a store at the aisle, middle of the aisle, etc.), product life cycle (offering items when they are near the end of their life), cannibalization / halo effect ...