India is a land of cultures and traditions, with many festive seasons falling throughout the year. Festivals like Dussehra,Diwali,Christmas, and Eid bring with them an increased market consumption that is unbeatable. With this period of the year, businesses can cash in on the demand with various offers, discounts, and promotions. However, it also brings in challenges, unique to the supply chain dynamics and inventory management aspect, during the festive season.
Pent-up Demand
Festive seasons in India witness a shoot-up in consumer demand. This gets facilitated through a blend of cultural practices where gifting is an intrinsic part of, and promotional offers that attract the consumers towards making a purchase. Retailers-both online and offline-find this as an opportunity to increase sales volume by way of offering discounts, cashback, and bundled deals.
This rise in demand is great for the revenue, but a nightmare for the supply chain because companies must now have enough of their product on hand to sell to this increased consumer demand. The inability to fulfil this demand will result in stockouts, which not only affect revenue through the loss of a sale but can damage brand reputation.
Inventory Management Challenges
Effective inventory management at this time will ensure that products are available at the right time and place. However, inventory management in India at this time of the year is not an easy task. The simple reason being, the diversity in India is such that peak demand will be created in different regions of the country at different times of the year, based on regional festivals and traditions.
One of the major challenges is to predict with high accuracy the demand of items. No doubt, the historical sales data can be useful for this purpose; in some cases, consumer behaviour during festivals may turn out to be unpredictable. Besides, uncontrollable external factors such as economic conditions, weather patterns, and even political events are some of the other influences that will affect purchasing decisions and make the demand forecasting exercise quite tough.
Furthermore, the lead time required for procuring inventory items can be longer since suppliers also come under great pressure. Similarly, manufacturers and suppliers have their own set of problems, such as shortage of labour and logistical bottlenecks, which also delay production and delivery schedules. This means that businesses need to plan their inventory well in advance, many months before the festive season actually sets in.
The Role of Technology
Many businesses in the country look up to technology in an effort to meet such challenges. Advanced inventory management systems driven by AI and ML help the company predict demand with much greater accuracy and thus set their stock levels accordingly. Large systems process a wide range of data from historical sales data to the current market trends, producing forecasts much more accurate than traditional methods.
Further, technology also allows tracking inventory levels in real time across different locations. This is quite important in India because the general tendency of supply chains is to spread across very large distances and diverse geographies. Real-time insight into the level of inventory will permit businesses to act on emerging changes in demand by either redistributing stock from one region to another or placing expedited orders with suppliers.
The Need for Collaboration
The other key issues are the collaboration along the supply chain. There needs to be a close fit between the retailer and his supplier or logistics provider through the festive season. This requires open communication and liaison, especially on the sharing of demand forecasts and inventory levels.
That is complex in India, where retail is very fragmented. Yet, companies that have invested in the right relationships with suppliers and logistics partners can perform better during the festive season. Companies in India are fast-adapting CPFR models to improve the efficiency of their supply chains during peak seasons.
Conclusion
The festive season in India presents enormous opportunities for businesses, but at the same time, it offers a very important challenge in terms of supply chain dynamics and inventory management. Success will be all about the right demand forecast, efficient inventory management, and effective collaboration along the supply chain. In essence, businesses will satisfy the demands of this festive season by leveraging technology and fostering collaboration, but they will be well-placed to strengthen their supply chains further in times to come. Mastery of these elements will continue to place them in good stead for success in an increasingly competitive market.
