Subscription box retail is one of the fastest growing sectors of e-commerce. You can subscribe to weekly or monthly shipments of anything from crazy socks to your car.
Most subscribe for the sheer convenience of having things you like, need, or want shipped to your doorstep. Subscription popularity has been on the rise for several years now, and the hype does not seem to be slowing down, emphasizing the need for predictive forecasting.
New subscription business types in Predictive Forecasting
Recently, a new type of subscription business came on the market, which offers an alternative to buying or leasing a car. Companies like Drive Flow (based in Raleigh, NC) allow subscribers to easily swap out their cars as their needs change. The process is simple; schedule a “flip” via the app or through text message, and then request the features you would like. A skilled technician then delivers your car and answers any questions you may have.
Subscribers are allowed unlimited flips and all plans include maintenance fees, insurance, and other perks. But how does Drive Flow know what cars to keep in stock? How do they see changes in the market demand or new trends? is key to handling these questions.
There has also been a movement towards large retailers launching their own subscription programs. As a way to combat online sales, prominent brick-and-mortar stores are trying to utilize existing inventory warehouses to better serve customers by introducing new products or daily essentials in monthly shipments to their doors.
Traditional supply planning and inventory optimization management approaches may not meet the new subscription model requirements. Time will tell how these retailers are able to support these new models.
Curation and continuity in Predictive Forecasting
Current subscription commerce can be broadly broken down into two models: . Curation is the generation of ideas and inspiration for the subscriber, by exposing them to new products or products similar to the ones they already like and/or use. Continuity is the more routine weekly task of getting items the subscriber needs or wants, for example, dog food or laundry detergent.
Regardless of the model, companies have to adjust traditional fulfillment models to accommodate subscription sales. For example, instead of shipping out based on customer order, subscription companies have to plan for high-volume shipments in a short window of time to ensure all subscribers get their shipments on time. This component (shipping) is one of the most expensive activities of the business and takes a significant portion out of the margins.
Based on consumer data, items in inventory will have to change often on top of the varying prices. This adds layers to the already complex process of inventory management. These complexities can be overwhelming. Consequently, many startups that lack supply chain experience turn to third-party logistics (3PL) companies rather than handling it in-house. Outsourcing is an option but that cuts into profits and can sacrifice attention to detail.
Predictive forecasting software
The subscription model relies heavily on predictive forecasting (demand planning or demand forecasting). Keeping the right stock of items for their clients is essential as their customers can cancel a subscription generally at any time. Now more than ever, these companies must invest in market-leading solutions leveraging state-of-the-art techniques or their businesses will suffer.
In order to successfully manage the logistics of a subscription-based business, companies should look into a cloud-based inventory optimization software. By implementing a solution like , the days of unnecessary steps, multiple versions of error-prone spreadsheets, and Excel freezing are over.
Ways to become more efficient are highlighted so you can drive down ordering costs, inventory holding costs, stock-outs, and error rates, while achieving the company’s highest customer satisfaction. This can all be done through Vanguard Software. Contact us for more information.