How Retail and FMCG Can Accurately Forecast Sales and Manage Sales Performance

This article explains the challenges that retail and FMCG businesses face in accurately planning and forecasting sales and monitoring performance and how MODLR can be used for more effective forecasting, planning, and control.

Introduction
Challenges of Retail & FMCG Companies
How MODLR Can Improve Sales Forecasting, Planning & Performance Management in Retail
An Example Use Case
Summary: Benefits of MODLR for Retail & FMCG Companies
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Introduction

Retail and FMCG (fast-moving consumer goods) businesses today face intense challenges to accurately forecasting their sales and managing inventory. They must protect and maintain profit margins from volatilities in consumer demand and seasonal fluctuations. Their complex distribution networks can also contribute to uncertainty, thus complicating sales plans and performance monitoring. In this article we look at how MODLR’s powerful cloud-based modeling and planning capabilities can be leveraged for more accurate forecasting, advanced performance management, and keeping real-time control over FMCG and retail operations.

Challenges of Retail & FMCG Companies

Retail and FMCG firms face many challenges in sales forecasting, planning, and monitoring performance. These include:

High demand volatility and the impact of seasonal and other trends

Consumer demand can be affected by any number of trends, sales promotions, and holidays. Demand can also fluctuate due to various external factors such as economic shifts and even weather. Such volatility can mean overstocking and waste, especially when goods are perishable. Understocking means lost sales.

Thousands of stock keeping units (SKUs)

Demand volatility is bad enough. But retailers must deal with thousands of items, each having their own unique demand patterns. It is a constant challenge to forecast sales and optimise inventory across many product lines.

Price-sensitive goods, subject to many promotions

Sales patterns may be greatly affected by discounts and promotions of their own and of their competitors. Traditional forecasting methods cannot capture the demand and sales impact of dynamic pricing models and a multitude of sales promotions and ad campaigns.

Disruptions in supply chains

Supply chains of most retail and FMCG businesses cross national boundaries, opening them up to a wide range of factors that can disrupt supply lines causing delays or shortages of raw materials and finished goods. Such disruptions directly affect sales planning, and sales performance when companies are unable to match their demand forecasts with the desired availability of goods.

Data silos and poor visibility

Often data that supports sales forecasts, plans and sales performance is spread across various systems—such as enterprise resource planning (ERP), customer relationship management (CRM), and point of sale (POS) systems. This inevitably leads to incomplete and fragmented insights, that hamper accuracy in forecasting. Scope for real-time performance management may be limited, making companies slow to respond to evolving market trends. This blunts their competitive edge in the fickle FMCG and retail markets.

Performance monitoring becomes ineffective

Often, retail businesses’ key performance indicators (KPIs) are not aligned across sales, inventory, and finance functions. Fifedoms and resulting inconsistencies make it difficult to link sales performance to profitability and to operational efficiency metrics.

Things can be better. They should be better. With MODLR, FMCG companies and other retailers can improve the accuracy of their sales forecasts, plans, and performance management.

How MODLR Can Improve Sales Forecasting, Planning & Performance Management in Retail

MODLR helps integrate data from multiple sources such as ERP, POS, CRM, and e-commerce, enabling businesses gain real-time insights for improving performance. Seamlessly integrated data can be used for advanced scenario modeling, as well as for automated performance tracking.

Here’s how MODLR can help FMCG and retail businesses:

More accurate sales forecasts

MODLR helps build predictive models. MODLR users can merge their historical sales data together with seasonal trends, incorporating the impact of promotional activities to build advanced predictive models for sales volumes. These are useful for both planning and performance monitoring.
MODLR makes “what-if” simulations quick and easy. Retailers can use simulations to judge potential impact of their promotional activities and campaigns. For instance, they are able to figure out what would happen to demand and sales when promotion spend is increased by 10%.
Seamlessly incorporate external data into the planning process. Retail and FMCG businesses can incorporate external data, such as those on economic trends and weather forecasts, with MODLR integrations to improve the accuracy of their plans and forecasts.

Make channel-level and SKU-level forecasts

Using MODLR, retailers can model demand for each SKU and for all their sales channels, including online, retail, and wholesale. This level of drill-in, granular forecasting is difficult using traditional forecasting tools or spreadsheet models.
Identify both overstocked or underperforming SKUs to improve replenishment planning.

Analyse impact of promotions and pick optimal pricing strategies

Impact analysis of promotional campaigns with MODLR helps companies forecast promotion-driven sales lifts more accurately. These insights are valuable for evaluating return on investment (ROI) on marketing spend.
Simulating price elasticity helps companies figure out more optimal pricing strategies towards maximising revenue and profits.

Easy integration of demand and supply planning
- Retailers can align their sales forecasts with supply chain capabilities with MODLR. This helps reduce both stockouts and overstocking and helps optimise inventory and minimise lost sales.
- Supplier lead times and logistics costs can be integrated into the demand models. This enables retailers to adopt more efficient and effective holistic planning processes.
Real-time performance management dashboards to monitor retail operations
- MODLR dashboards present a dynamic view of operations, with live KPIs for sales, margins, promotions, and inventory turnover, making it easy to monitor and manage retail operations and sales performance.
- Users can drill down on data and analyse performance for better management and control over the sales and inventory functions. For example, a firm can analyse its sales performance by region, by store, by specific SKUs, or by salesperson.
- MODLR dashboards keep you on alert. They automatically alert managers about deviations from forecasts.
Scenario analysis and stress testing with minimal effort
- Retailers can perform rapid scenario analyses for supply chain delays and disruptions, tariff changes and other factors that influence their operations, performance, and the bottom line.
- Businesses can discover the potential impacts of competitor activities that will have an impact on demand and sales of exsiting offerings. Retailers can take early mitigatory measures in response to competitor strategies like aggressive pricing and discount campaigns, introduction of new products and features, and the expansion of retail networks or new sales channels.
- Empowers FMCG and retail teams to build resilience into their operations and to make plans that factor in uncertainty.
Integrated financial planning
With MODLR retail businesses can link their sales forecasts directly to their profit and loss and cash flow models. Connecting finance with sales, operations, supply chain planning, and human resources lead to holistic and real-time insights. Access to company-wide data, as opposed to siloed information, enables firms make optimal decisions and choose more informed strategies.
Integrated financial planning improves accuracy of forecasts and overall business agility. Forecasts are dynamically updated for changes in demand, costs, and various external conditions. Firms can respond faster to market changes and proactively reallocate their resources as needed.
Enhances cash flow and risk management and proactive decision making. Linking operational plans for production or hiring for instance, to financial outcomes such as cash flow and EBITDA (earnings before interest, taxes, depreciation, and amortisation) provides companies early visibility into potential financial risks. Companies can avoid liquidity crises and ensures optimal capital allocation and effective risk mitigation.
Supports bottom-up and top-down planning across sales, marketing, operations, and finance departments.
An Example Retail FMCG Use Case
Problem:
A national FMCG distributor was facing sales losses and high wastage due to overproduction of perishable goods and frequent stockouts for popular stock items.
MODLR’s Solution:
The business built a demand forecasting model by SKU and region, factoring in seasonality as well as their promotional campaigns using MODLR.
They integrated POS and their warehouse data into a real-time MODLR dashboard
Result:
There was a 15% reduction in wastage and a 10% increase in on-time order fulfillment. Sales forecast accuracy was improved by 20%.
Summary: Benefits of MODLR for Retail & FMCG Companies
We can summarise the benefits for retail firms when using MODLR as follows:
- Improvements in accuracy of sales forecasts, fewer stockouts and minimising overstocking.
- Gain real-time insight into performance KPIs through MODLR’s automated dashboards.
- Better alignment of sales, marketing, and supply chain plans.
- Enables integrated financial planning, which enhances cashflow management and risk mitigation capabilities.
- Higher profitability arising from optimized pricing and promotional strategies.
- Faster and more informed decision-making with dynamic scenario planning and cashflow modelling.
- Improves business agility and resilience.
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