Choosing, or developing, new products for introduction to your catalogue presents significant challenges, one of which, is choosing how much of of the new item to order. In the coming weeks, we will examine a few different scenarios and give you tips to help you nail your new product launch and stay in stock to keep the momentum going. This week, we will start off easy by covering the most basic type of new product introduction, and in future posts, we will build on the tips and principles covered here as we handle more complex product launches.
Scenario One: The item is a replacement for an old version of a product you are phasing out
This is probably the easiest type of item to forecast demand for, and an ideal scenario where you can leverage your existing data. Most of the time, we are allowed to make some pretty basic assumptions: the item will have a similar roll-out schedule to the previous generation item, the seasonal demand patterns (if they exist) will be similar, sales volume will remain within a relatively close margin to the existing phase out item. There are exceptions to these assumptions, of course, but for the most part, they will hold true for new generations of a product.
As a result of the assumptions listed above, you can do a straightforward history transposition from the old product to the new product (copy the history as is). There are many ways to forecast demand once you’ve done this, but we recommend using time series forecasting technique. Read more about time series forecasting. Once the product officially launches, maintain the old item’s history attached to the new sales data, so you (or preferably the forecasting models) can reference it for seasonality and growth trends.
Obviously, this is an ideal situation for a new product launch, but the principles of time series forecasting and transposing item history will come in handy as we progress to more difficult launch scenarios in the future.
Stay tuned in the coming weeks for more tips on how to successfully forecast demand for new product launches.