Promotional events are where a retail supply chain’s planning capability gets tested hardest. During a nationally featured promotion or seasonal event, the usual planning horizon collapses. For normal cycles, it can take weeks to produce a forecast, finalize vendor commitments, get network allocation has to clear, and schedule store-level replenishment. But for a promotion, that entire cycle is often compressed into just a few days. If any step in that planning cycle runs slow, the promotion inventory either arrives at the store too late or in the wrong quantity. Both failures ultimately surface as inventory imbalances—stockouts during the event or residual overstock afterward—which are visible in the company’s inventory ledger.The cost of these problems is large. Research from the retail technology advisory firm IHL Group puts the global cost of inventory distortion, the combined cost of out-of-stocks and overstocks, at $1.73 trillion annually, or roughly 6.5% of global retail sales. The research found that supply chain disruption is the single largest contributor to inventory distortion at $301 billion. In my experience, a large share of this cost shows up during promotional windows when demand, pricing, and inventory decisions are most volatile.A lot of companies are looking to artificial intelligence (AI) to improve the inventory distortion problem. IHL’s study found that 76% of the retailers currently using machine learning for demand planning report positive results. However, fewer than one in four retailers have actually rolled out AI in the areas that drive inventory distortion, such as promotional planning. While many retailers…
