Monday, January 28, 2013

Demand forecasting gives duty free sales a boost

If you've traveled by air recently you may have noticed a few changes to major airports. Or at least I travel infrequently enough that they seemed new to me. Free wifi, not only a Starbucks and Caribou on every corner, but every other food or drink you might crave. Airports are looking more and more like malls. Giant malls with an unending flow of fresh customers many of whom are all to eager to buy high priced merchandise in the duty free shops. And while companies like Nuance Group are ready to take advantage, they face a unique challenge: predicting demand for the customer that won't come back 'when it's in stock'.

"It's not like a normal department store where a customer can put something on order or lay-by," Nuance Group Australia & New Zealand CIO, Fraser Reynolds says. "When a passenger comes through the airport that's it, we only get one bite of the cherry." [1]

In 2007, the international duty free retailer which operates on eleven continents, was manually tracking sales.The lead time for its products was sometimes as long as three months, meaning miscalculated demand would translate directly into lost sales.

So, what to do?

Recognizing that the inefficiency of their current sales tracking system was causing their stock to poorly match actual customer demand, the company adopted a new forecasting software. They used the IBM created Dynamic Inventory Optimisation System, to incorporated automated sales tracking and forecasting directly into their sales system - and it worked. [2]

Despite throwing caution to the wind, the CIO recalled "Looking back, it probably wasn't the best idea to start with our biggest store," the transition went off successfully. In the immediate aftermath, Nuance reported increased sales, inventory reductions of up to 15% and reduced stock shortage.

This year, the company continues to grow as their newest  contract with Bulgarian Airways is projected to gross 180 million euro over the next five years. [3]

Nuance's latest contract is expected to deliver €180 million in sales over five years

 Nuance's latest contract is expected to deliver €180 million in sales over five years


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