Hello, it’s me.
Anybody alive in 2015 remembers when Adele pretty much broke the internet with the release of her single, “Hello.” It felt like the world had come to a standstill. Adele was hardly an unknown when the song came out, but the song, with its haunting opening line and earth-shattering chorus, hit the stratosphere and suddenly, everyone—everyone—had to buy that record.
Breaking a total of eight U.S. sales records and topping the records charts in a record-setting 36 countries, the song literally and figuratively struck a chord with the entire world.
So, when the song resurfaced last year after Adele released the lead single, “Easy on Me,” to promote her newest album, 30, the response was instantaneous and staggering, but not surprising. For the legions of Adele fans, this was the return of a bonafide musical deity and fans could not wait to get their hands on the new album.
For super fans and collectors, the holy grail of any album release is the vinyl pressing, and 30 was no exception. But since digital releases had been the trend for years, the industry was unaware of the groundswell of interest in vinyl pressings that arose during the pandemic. And since the industry was unaware, manufacturers of vinyl were also caught off guard. As a result, there simply wasn't enough vinyl.
The seemingly sudden demand for vinyl pressings presents an interesting case study on the topic of demand planning/forecasting.
How the Pandemic Caused a Spike in Demand for Old School Vinyl
Just like “Hello,” the pandemic brought the world to a sudden standstill—people were now stuck at home and had no choice but to find new interests and hobbies to entertain themselves. Not everyone had a burning desire to bake bread or start an herb garden, so many decided to invest in high quality home audio setups, which led to a vinyl frenzy. Variety reported that in 2020, the value of vinyl sales surpassed the value of CD sales for the first time since 1986, and vinyl sales only continued to climb throughout 2021.
So when Sony placed an order for 500,000 vinyl records of 30, both domestic and international vinyl plants had to stop production on other albums to accommodate Sony's order. This resulted in an industry-wide shortage of vinyl pressings—now other artists had to wait up to nine months for vinyl pressings of their new albums. This also impacted record stores; they couldn't order vinyl records they usually keep in stock, nor could they offer their customers new releases. Now, even classic vinyl records became collectors’ items—especially if printed on colored vinyl.
So, by the end of 2021, Adele’s 30 was pretty much the only album available in vinyl—period.
The vinyl record shortage caused by Adele underscores the importance of demand forecasting in logistics. Since the music industry had not considered consumer behavioral changes, they did not ramp up vinyl production and ultimately could not satisfy demand. But Sony had read the writing on the wall and their demand forecasting strategy paid off—30 went on to break both single-week and single-year vinyl sales records, delighting Adele fans and leading to a 63.1% increase in Sony's Q4 physical sales in 2021.
The trend has only continued. This year, Target, Walmart, and Old Navy fell victim to poor demand planning and had to recalibrate their inventory mix after falling out of sync with consumer trends. Even huge corporations have had to learn the hard way just how essential demand forecasting is to the bottom line and the reputation of their brand.
The "Adele Effect" in Demand Planning
Demand planning is a supply chain management process that attempts to predict future consumer demand for products using historical data on buying patterns, along with a pinch of fortune telling. One common example is how seasonality influences consumer buying patterns; people aren’t looking to buy barbecue pits and swimsuits in the dead of winter nor are they looking for parkas and snow boots in the heat of summer.
The overall goal of demand forecasting is to have enough inventory to meet consumer demand without having a surplus, and oftentimes, it’s not as obvious as different buying patterns in the summer than in the winter.
If a product is backordered, businesses lose out on revenue and risk losing consumers in the future, which is bad enough. But, if a brand buys too much inventory, they risk not only the carrying cost, but also losing money on products that just don’t sell. Inventory surpluses also require additional warehouse space, which increases storage costs. Businesses can’t afford to both lose income and increase expenses if they want to stay in front of market shifts. Demand planning helps business leaders “make more proactive decisions, while being responsive to their customers’ needs.”
Why Digital Technologies Are Essential for Warehouse Demand Forecasting
Yes, proper inventory management is an essential part of fulfillment, but accurate inventory counts are also among the key components needed for demand forecasting. The fact is: counting things by hand will always lead to errors and an excel spreadsheet will never be as accurate as an automated inventory tool. If brands want intuitive data to launch their demand planning strategies, they need two things: precise inventory management and data, plus the ability to pivot when things don’t go as planned.
Precise, Factual Inventory Management
Demand planning for brands managing their own warehouse must start with exact inventory management. Relying on manual inventory management isn’t going to cut it. If brands don’t know which warehouse their inventory is in, how much they have, how much is needed to fulfill orders, and what needs to be restocked (and how quickly) after orders are completed, the data needed for demand planning is incomplete at best. This leads to having too much of what people don’t want and too little of what they do. So before demand planning can really help managers out, a sophisticated inventory management system, like topShelf, is a must-have. Handheld scanners help with accuracy and a well-laid out warehouse with clear paths to products also makes a big difference.
Anticipating the Impacts of Outside Factors on Inventory Levels
Let’s say that companies had the vision to fill their warehouse shelves with Adele’s album—that’s great, but if you don’t have the labor to move the product out, a well-stocked warehouse means little. That’s why a demand planning strategy must track potential logistical issues and kinks in real time. If Adele or another musical goddess is releasing a new album in 2024 right before the holiday season, shipping delays due to weather, volume, and supply chain shortages are definitely on the horizon and must be factored into demand forecasting. Businesses that monitored factory shutdowns in China used that knowledge to make adjustments on their end. It’s also a good idea to keep an eye out for potential labor strikes and raw materials shortages.
Through automated inventory tracking and real-time insights into potential logistical pitfalls, adaptable and shrewd demand forecasting is within reach. Technology is the great leveler and helps even the smallest brands and warehouses stay profitable.
Download our white paper, Fulfillment Automation Guide: How to Keep Pace with the Speed of Ecommerce and Customer Expectations, to learn how automation can help with demand planning and much more.
To see how an WMS or OMS can provide greater inventory control, request a demo.
