Today’s PlanningPosts chat is with long-time veteran in the inventory optimization world, Tracy Coon, along with PlanningPosts evangelist Dan Craddock, on the topic of Optimizing New Item inventory.
Summary: New item forecasting is a troubling area because of its tremendous profit impact. If a company has $50M in inventory, New Items could be $5M or more of that investment. Yet, as Tracy explains, so few demand forecasting teams make optimizing new items a key focus. Download now to learn some strategies for putting a sense of urgency behind improving the performance of your new items across the portfolio.
Episode 8 Show Notes
Todd Intro: I am here with two people who consider themselves lifelong inventory optimization professionals. They love the profession and their careers have been built on educating inventory analysts and inspiring inventory planning and demand forecasting excellence.
Welcome, Tracy Coon and Dan Craddock! It’s great to have you both on the show and I know you want to dig into this topic in a big way. You were both replenishment analysts for wholesale companies prior to becoming education consultants.
Dan & Tracy: brief introductions
Todd: Despite this passion for the profession, you both say that you continue to be frustrated by the lack of success in one key aspect of a company’s inventory:
Optimizing New Items
New items? Really? I would think that inventory planning teams spoil and pamper their new items like they do their children? I would think that their shelves are stocked high with new items and that they are proud to show them and their results.
Is it really true that there is that much room for improvement here???
Dan: Todd, as I have watched our inventory community over many years, New Items is THE most common under-performing sector we experience in the retail and wholesale distribution world.
It always surprises me. It is amazing how new item poor performance is common – and also how it is tolerated.
Tracy: I agree… and I see it across industries and companies. Some do it well, but most really struggle for consistency.
Todd: Why is that? What is at the heart of the matter?
Dan: Todd, we will get into the details of the issue, and several suggested moves, but the most surprising thing to me, is that poor performance on new items is tolerated!
I can say that as a former replenishment analyst, I rarely got into trouble when I was out of stock on new items. I simply had to remind my bosses that the item was ‘new’ and there was a collective shrug and acknowledgement, and like magic, I was off the hook.
many inventory teams feel they have a ‘get-out-of-jail-free’ card on new items. This has to change.
Tracy: That’s right, and it should be just the opposite.  These items are the future of the company and the need a strong, solid start. There should be even more emphasis on forecasting these items than the day-to-day items.
I don’t believe most companies really take new items seriously enough. We rarely hear presidents and leaders requesting to see weekly or monthly reports on new item success.
You need to have some urgency and feel some pressure.
Todd: It sounds like the overall approach is wrong. What should the demand forecasting strategy be for New Items? What tone should be set from the top down?
Tracy: New items should be treated like new team members. There should be special attention and a realization that they need a strong orientation and ongoing mentoring and guidance. There should be extra investment of time paid to them so that they will pay dividends later.