One of the most important factors affecting consumer behavior is weather. It can create a run on inventory, like the rush for snow shovels after a big snowstorm, or it can leave a retailer painfully overstocked, like having piles of rain gear during a drought.
That was the idea behind Planalytics , a new business division of Strategic Weather Services that complements micro-marketing initiatives by making retail and manufacturing planning more complete, said David Frost, Planalytics’ senior vice president. Planalytics’ “weathernomics” technology provides clients with information about the specific impact of future weather on consumer demand by product, location, and time, Frost explained.
“We can correlate any business metric that may be related to weather and history and better understand how that metric will behave in the future,” said Frost. “From a CIO’s point of view, technically, in terms of systems, the output of this can and is fed into existing replenishment systems and forecasting systems to improve the way they function.”
If powerhouses like Sears and Kmart can make good use (and profits) off this new technology, it could be exactly what you need to make smarter supply chain management decisions.
No one escapes the weather
“Everyone has a plan to deal with weather, but we make planning more complete,” said Frost. “If you know something about how future demand will change, then you can adjust your plan to create greater success.”
Frost provided an analogy of the situation, saying that most current planning is inherently like driving backward using your taillights to see.
“You can look at the past year’s trends, look at weather, fashion, etc. and plan growth from there,” he said. “But what we offer is a fundamental understanding of what the next year will give a client. So now the business can view things through the front windshield with its headlights on.”
“It might be lights in the fog,” Frost added, “but it’s a hell of a lot better than nothing at all or what they had before.”
More science than guessing
For Sears, Roebuck and Co ., a little science has gone a long way.
Weathernomics is a software solution for retailing in relation to the weather that Sears has relied upon for many years, said Jonathan Rand, director of merchandise information for the national retailer.
The company partnered with Strategic Weather Service to see what they could do for Sears with its seasonal products—air conditioners, car batteries, swimwear and the like, Rand said.
Sears receives weather forecasts 12 months in advance for its locations on a weekly basis, Rand said. They use this information to stock shelves and provide better customer service, he said.
“Strategic Weather Services has given us surprisingly precise predictions for the last three or four years,” Rand said. “It has been accurate to the point of being scary at times.”
In 1998, for example, Rand said Sears had a record year in air conditioner sales because his buyer used the Strategic Weather Services forecast and ordered additional stock before a record heat wave struck.
“Stores everywhere were on the news because they had no air conditioners,” Rand said. “But we were on the news because we never ran out of stock.”
When accuracy counts
Kmart stores have also seen the benefits of the service, according to Mary Lorencz, a spokesperson for the company.
While the company does not use weather forecasting company-wide, Lorencz said certain divisions have relied upon it. In particular, the horticulture and automotive divisions have “used weather forecasting to anticipate what types of products to move into what stores.”
Demand for weather-related automotive products such as snow tires, engine block heaters, and car batteries can be difficult to predict, she said, so accurate weather forecasting is important.
Accuracy is key, but Rand said he believes Strategic Weather Services delivers. He said that in Chicago, where Sears is based, the local weekly weather forecast is considered highly accurate at 60-65 percent accuracy. “Weathernomics has been accurate to almost 80 percent all around the country,” he said.
More information means better decisions
Weather isn’t the only factor in a planning cycle, of course, but Rand said it is one of the most important. Sears looks at everything from weather to fashion among its tools to make the right purchasing and distributing decisions, said Rand.
At best, Plananlytics' clients have five to seven years of data to work from, said Frost. The farther back they can go or the more data they have, the more accurate Planalytics can be by extracting the weather component from planning the promotional or price component, he explained.
Still, every bit helps, both historically and with emerging technologies.
Hau Lee, director of the Stanford University Global Supply Chain Management Forum, said advances in information technology, including weather forecasting, have created new opportunities for managing supply chains.
“New information technologies have redefined the rules of the games in supply chain management,” Lee said. “Companies [can] capitalize on the technological innovations to enter the market place, offer new services and products, and create new value propositions to consumers and business partners,” he added.
Change, quite clearly, is in the air.
Trent D. McNeeley, an Indiana-based freelance writer, writes about technology and business for various national publications.If you’ve used weather forecasting in your supply chain management, tell us about it by posting a comment below. If you have a story idea you’d like to share, please drop us a note .