SKU Reduction in the Christmas Cards This Season

Economic weakness and low consumer confidence, combined with vendor capacity/reliability, are the top threats to business success this peak season, according to a recent Peak Season Trends and Strategies Survey Report by Tompkins Supply Chain Consortium.

Wounds from the 2008 and 2009 holiday season are still fresh in the minds of retailers and consumer product manufacturers, writes the report’s author, Chris Ferrell, director of the Consortium and author of the report. Almost half of the manufacturers surveyed plan on maintaining lower inventory levels; however the primary mechanism appears to be SKU reduction with more than 1 in 3 reporting plans to stock fewer items. This represents a conservative hedge against the deep end-of-season discounts of 2008, and the willingness to incur stock-outs in 2009.

“Companies appear to be backing items they believe will be guaranteed winners and eschewing line extensions and marginal stock,” the report states. “The emphasis on fewer SKUs and a focused ABC strategy should allow inventory planners to walk a more precise line between out-of-stocks and end-of-season discounts.”

“What we found was not surprising, but very real, based on expectations for the upcoming holiday season,” adds Ferrell. “Although there are no clear forecasts for the season, companies are doing what they can to brace themselves. They need to see a profit, as well as make sure their customers are satisfied.”

The top five threats ranked by survey respondents are:

• Economic weakness/low consumer confidence
• Vendor capacity/reliability
• Forecast accuracy
• Inventory levels
• New products/markets/channels

Additional survey results include:

• Growth in China and Southeast Asia remains strong and continues to flourish.
• Major shifts in near-shoring for procurement sourcing or supplier diversification from China back to the U.S. are not yet occurring.
• Improved supply chain integration and personnel experience will lead companies through the holiday peak season.
• Nearly 60% of companies began their inventory build for the 2011 holiday season prior to Labor Day.
• Nearly two-thirds of respondents list the economy as the single biggest threat to seasonal profitability.

The Consortium conducted the Peak Season Survey with its members online as well as during the Supply Chain Leadership Forum held recently in Florida. Nearly 80 retailers, manufacturers, wholesalers/distributors participated overall.

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