Driving pharma sales in developing countries

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Facing inventory challenges during peak seasons? Discover practical, proven strategies to manage seasonal demand, improve forecast accuracy, and optimise supply chains for better availability, lower costs, and higher profitability.

Managing inventory through seasonal fluctuations

As summer approaches, demand for air conditioners, lighter clothing, and refreshing beverages sees a noticeable rise. Clothing retailers introduce breezy summer collections in late spring, while beverage companies promote ice creams, iced teas and tropical fruit juices to match the season. Thus, the purchase patterns shift from those products favoured during the winter months. This cyclical shift in consumer purchasing behaviour, known as seasonality, refers to predictable demand fluctuations that, while varying in magnitude, are certain to occur.&nbsp;Seasonality can be categorized into Technical and Man-Made Seasonality. Technical seasonality arises from natural factors like weather, driving demand for products such as woollen clothing in winter or air conditioners in summer. Man-made seasonality tends to be shorter compared to technical seasonality and stems from events like festivals or promotions, such as Diwali or Black Friday which trigger spending spikes.<h5>&nbsp;</h5><h5>Why is it difficult to manage seasonality?</h5>Demand fluctuations larger than capacity: Managing seasonality, irrespective of the type of seasonality, is challenging because, while fluctuations in demand are expected, the magnitude of those fluctuations is much larger than any fluctuations experienced during non-seasons. For example, certain products, like air conditioners/refrigerators can experience sales surges of over 20% during peak periods, such as summer or Diwali. This demand surge is often much more than the company's production capacity for the same period due to capacity limitations, lead times, and supply chain constraints.<figure class="image"><img style="aspect-ratio:3989/3050;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1745586381.png" width="3989" height="3050"></figure>Inaccurate forecasts: Since, manufacturing all required items during the sales season itself is often impractical, companies have no choice but to forecast expected sales and produce goods in advance to ensure availability when demand peaks. However, demand is influenced by external factors such as consumer preferences, economic conditions, competitive actions, and unforeseen events. So, no forecasting method can perfectly predict demand fluctuations, making it impossible exactly estimate how much to manufacture.The inherent inaccuracy of forecasts can be aggravated by supply chain and other conflicts:Poor data accuracy: In addition to using POS data, using outdated, incomplete, or incorrect data can further undermine forecast reliability. Without accurate data, predictions may not reflect real demand.Limited communication and data sharing: Limited communication and data sharing among supply chain stakeholders can result in fragmented or inconsistent information. When departments or partners aren’t aligned, forecasting worsens.Differing departmental goals and alignment: Departments often have differing goals, which can lead to disagreements in the forecasting process. Misalignment between sales, marketing, and operations, for instance, can create conflicting priorities and deteriorating forecasts.Accounting for in season fluctuations: Forecasting challenges are not limited to initial predictions. As the season unfolds, it becomes increasingly difficult to incorporate fluctuations into demand forecasts. For example, a milder winter reduces the need for heavy jackets, while a harsher winter increases the demand for insulated clothing. Navigating a season can be akin to steering through ever-changing seas.&nbsp;<h5>Impact of inaccurate forecasts</h5>Inaccurate forecasting and the fact that real-time corrections are tough, considering the lead times involved, make it difficult for companies to plan production, inventory, and supply chain operations effectively. This significantly impacts companies in various ways:Rushed production: To meet seasonal demand, companies often push for overtime or expedite production, leading to increased labor and operational costs, as well as potential compromises in quality.Supply chain bottlenecks: Sourcing additional raw materials or components on short notice can be difficult or expensive. These supply chain challenges may cause delays, preventing companies from meeting demand on time.Stockouts and lost sales: Despite efforts to scale up production, the company may still fall short of meeting full demand, leading to stockouts, missed sales, and dissatisfied customers during a crucial revenue window. In a last-minute scramble to mitigate this, companies often resort to costly expediting measures such as inter-store or inter-depot transfers.When demand goes unmet despite best efforts, frustrated customers are forced to look elsewhere. For example, if a store runs out of a popular smartphone model, shoppers may turn to competitors, not only causing immediate revenue loss but also risking long-term customer attrition. The potential for future sales is also jeopardised.<figure class="image"><img style="aspect-ratio:3989/1876;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1745586306.png" width="3989" height="1876"></figure>Excess stock: In trying to meet potential demand, often with an optimistic approach, companies may overproduce, leading to surplus inventory once the season ends. This excess stock ties up working capital and storage space, resulting in financial strain.<figure class="image"><img style="aspect-ratio:3996/1876;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1745586257.png" width="3996" height="1876"></figure>Margin erosion: In addition to costly expediting measures to prevent stockouts, businesses often resort to heavy discounting to liquidate excess inventory. This also leads to margin erosion. This is because while this approach helps clear stock, it comes at the expense of profitability and reduces full-price sell-through rates, ultimately impacting future sales strategies and brand positioning.<figure class="image"><img style="aspect-ratio:3988/2641;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1745586195.png" width="3988" height="2641"></figure><h5>Accurate forecast – an oxymoron</h5>Since the problem is inaccurate forecast, working towards an accurate forecast- possibly Artificial Intelligence enabled, may seem like the ideal solution.&nbsp; But the question arises: “Can forecasts ever truly be accurate?” Currently, despite significant investments in advanced tools, forecasts remain far from perfectly reliable. However, steps can be taken to minimise inaccuracies. To achieve this, we can leverage some of the inherent characteristics of forecasts and enhance supply chain reliability.<h5>Characteristics of forecasts</h5>1.&nbsp;&nbsp;&nbsp;&nbsp; Forecast variability: Typically, companies rely on POS data to create forecasts. However, forecast accuracy is poorest at the point of sale but improves as we move upstream toward production. Aggregate forecasts, which compile data from multiple sources, are typically more reliable, as these data points tend to balance out individual variations, resulting in a more stable and predictable overall demand pattern.<figure class="image"><img style="aspect-ratio:3996/1969;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1745586101.png" width="3996" height="1969"></figure>2.&nbsp;&nbsp;&nbsp;&nbsp; Reliability of forecasts by SKU types: Although slow-moving SKUs (tail products) are challenging to forecast accurately due to their unpredictable demand, fast-moving items offer more reliable forecasts thanks to their consistent sales patterns.3.&nbsp;&nbsp;&nbsp;&nbsp; Impact of replenishment lead times: Accurate forecasting is often more challenging over longer horizons. Shorter lead times or horizons, however, generally yield more precise forecasts because they depend on recent, reliable data, reducing uncertainties. Longer lead times require assumptions about various external factors such as competitor activities and market trends, which heightens the probability of forecast errors due to the increasing uncertainty over time.By leveraging these characteristics of forecasts, we can minimize the impact of forecast inaccuracies and build a supply chain that ensures product availability despite seasonal fluctuations.&nbsp;<h5>Key solution elements</h5>Build agility: Creating such an efficient supply chain means that firstly that there must be a way to reduce replenishment lead times, or the speed at which items are restocked so that the forecast horizon can be shortened. Moreover, when lead times are reduced, the minimum inventory to be held at various nodes in the network for every SKU will be reduced, enabling the stocking of an increased range of items in the supply chain for the same working capital. This will improve availability of items without burdening any part of the supply chain with additional investment.Setting inventory limits: First step can be to set inventory limits for each SKU at various stocking points, at the different geographic points. Shipments can be halted when these limits are breached. This enables early detection of demand or market changes and prevents overstocking. At the same time, production and replenishment can prioritize high-risk SKUs to avoid stockouts. Dynamically adjusting these inventory limits to reflect changing demand patterns ensures the supply chain remains efficient, responsive, and aligned with market needs, maintaining product availability at every point.Pull based inventory movement: When, in addition to the above step, a ‘pull’ system is adopted in the supply chain to respond to daily consumption triggers, it minimizes the response lag from plants to real-time demand signals. Furthermore, by maintaining most inventory at aggregate levels, such as plant warehouses, the company ensures that most of the stock is positioned where demand variability is lowest while also effectively decoupling supply lead time from replenishment time. This system enables the company to respond with agility to daily demand across diverse geographies while keeping overall stock levels minimal.&nbsp;Season build up: Despite supply chain agility forecast-based inventory buildup for seasonal demand is inevitable and therefore inherently prone to errors. So, proactive measures in the S&amp;OP must be implemented to minimize the impact of forecast uncertainty.<figure class="image"><img style="aspect-ratio:4001/1999;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1745585994.png" width="4001" height="1999"></figure>How much to make: Firstly, as part of the S&amp;OP process, companies should leverage aggregated forecasts to capture overall demand trends. This approach is more effective than POS-based forecasting or sales-driven inventory positioning, which often leads to stock imbalances. While demand will naturally fluctuate across SKUs and timeframes, combining aggregated forecasting with inventory held at aggregated levels and replenishment based on actual consumption helps optimize stock distribution across the network, reducing variability and enhancing supply chain stability.When to start making: It is also logical to schedule the production of forecasted inventory as close to the season as possible. This approach allows for better sales estimates (shorter forecast horizon) while minimizing the tying up of working capital for longer than necessary. But it should also allow for some time buffer of at least one replenishment lead time to catch up in case uncertainty hits. Let’s take a simple example to see how this can work. Let’s say a plant has a rated capacity of 1,000 air conditioners (A/Cs) per month and typical consumption is 700 units, leaving a spare capacity of 300 units, the company can plan accordingly. If peak demand in April is expected to reach 1,600 units, the plant can produce the additional 600 units required for the season by March (assuming one month as the RLT) utilizing its spare capacity to manufacture 300 units per month in the two months leading up to March. The inventory limits of what the plant can make can be increased slowly. This will allow the supply chain to react smoothly and not create RM unavailability (due to inadequate sourcing time) or urgencies in production.<figure class="image"><img style="aspect-ratio:3998/1485;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1745585939.png" width="3998" height="1485"></figure>Which SKUs to make: To reduce inventory risk while ensuring availability after the buildup, it is also useful to classify SKUs into categories – runners (fast movers; top 80% of sales), Repeaters and Laggards (slow movers; lowest 10% sales), and create the season build up strategy based on that. Since its known that the runners will continue selling well even after season, there is very little risk if these are built up in excess. So, extending the earlier example, if a company is manufacturing many types of A/Cs, this company can confidently manufacture the runner A/Cs using the spare capacity. This means that the company will have to make very few of these items during the season and the entire available capacity can be dedicated to the repeaters and laggards based on actual consumption from the market.Ramp down: At the end of the season, inventory limits—temporarily exceeded to meet peak demand—must be reinstated. To achieve this, production ramp-down should begin one replenishment lead time before the season's expected close. Just as ramp-up was managed through gradual increases, ramp-down should be executed through controlled reductions to prevent supply chain disruptions. This approach ensures a smooth transition back to pre-season operational levels, maintaining stability and efficiency.Automated decision making: All the decisions needed to ensure the supply chain responds and adapts to daily consumption signals (both before and during the season), as well as the steps required for seasonal build-up and ramp-down, can be automated. This automation ensures meticulous execution, preventing delays in raw material sourcing and manufacturing.&nbsp;<h5>Conclusion</h5>Poor seasonal management can lead to substantial financial losses. Companies typically face margin erosion of up to 10%-40%, depending on category and extent of inventory mismatch due to excess stock liquidations and a 5%-30% revenue loss from stockouts during peak demand periods. Adopting a pull-based supply chain with inventory limits that dynamically adjust by sensing demand not only mitigates the inherent inaccuracies of traditional forecasting but also aligns supply chain operations with actual market conditions, leading to improved availability and reduced working capital requirements. Furthermore, by implementing the suggested processes for seasonal build-up and ramp-down, companies can better navigate large known demand fluctuations with agility, maintain excellent product availability, and capitalise on market opportunities more effectively, ultimately enhancing their profitability.&nbsp;&nbsp;

SummaryThis article delves into the recurring challenge of project delays in new product development (NPD). It explores how mismanaged timelines and internal blame games contribute to these setbacks. It examines what missed timelines indicate. Further, the article highlights the importance of efficient execution by project teams. It explores the fallacies in the negotiation process of timelines between top management and operational teams, revealing how strategic adjustments and misunderstandings about time buffers lead to unrealistic expectations. By identifying the root causes of high development lead times and offering synchronization solutions and enhanced communication across teams, this article provides valuable insights for improving overall project efficiency and success.&nbsp;Picture this: a conference room bathed in the sterile glow of fluorescent lights. The room and the lights witness a swarm of gloomy faces towering over a non-descript, circular table and pondering over what could have been. The topic under discussion is time management and how, for the nth time, they are in danger of missing a milestone of a significant project which would launch a new product in the market.Such sights are not uncommon in NPD project management environments. In such situations, the ire of top management is directed towards project teams executing the projects, how inefficient they are, how their commitment counts for nothing and how their trust is running on thin ice. On the other hand, each team that faces blame often shifts the responsibility to the upstream team, citing delays in receiving inputs, issues with the quality of inputs that lead to reworks, and so on.A play of blame and counter-blames ensues. Everyone seems right in his place, leading to a lot of confusion on what or who caused the problem. In such environments, any "root-cause analysis" either fails or throws up trivial solutions. Without any root cause, organizations resign themselves to expediting &amp; fire-fighting as the only way to solve problems. Expediting leads to a lot of wasted effort and creates a lot of bad blood between teams (Supply Chain vs R&amp;D, Supply Chain vs Quality, R&amp;D vs Process Engineering, etc).Organizations find themselves trapped in a vicious loop, expending energy on ineffective solutions while the underlying inefficiencies persist, undermining overall project success and progress.So, how do we achieve clarity in this conflict?Given that the issue initially arises from missed timelines, the solution may lie in deeply understanding timelines' genesis in any project…The origin of timelinesProject timelines are generally drawn at or before the start of the project. The methods of estimating timelines vary. Sometimes, a high-level estimation of individual project phases is done based on experience, and project milestone dates are drawn. In other cases, planners are brave enough to do a bottom-up estimation. They identify project tasks and their dependencies, estimate task durations, and roll them up in various ways to get the milestone dates.In both scenarios, the initial estimation, whether bottom-up or top-down, is followed by a complex negotiation process between planners and the top management.Games people play- The complex process of timeline negotiation (estimation?)Once initial estimates are established, an intricate negotiation dance ensues between the operating teams and top management. Each side strategically adjusts these estimates—adding or subtracting buffers—to guard against unexpected challenges. For instance, top management often pushes for more ambitious timelines to maintain pressure on the teams, such as trimming a 22-month estimate to 18 months, believing that a tighter deadline is necessary to achieve the original timeline. In response, operating teams anticipate this tactic and inflate their estimates, proposing, say, 26 months so that after negotiation, they secure the 22 months they initially needed. However, top management is aware of these tactics and counters by further reducing the timeline. Ultimately, the negotiation becomes less about finding the truth and more about who can outmanoeuvre the other.Good or bad, the negotiation finally ends with some mutually agreed-upon timelines. Agreement to timelines by the operating team at the end of any complex negotiation process is viewed as a commitment and true validation of the initial plan and its accuracy.Thereafter, the general assumption is that achievement or non-achievement of timelines is an indicator of system efficiency:The more milestone dates one can meet, the higher the system efficiency.Any deviation from project timelines is put up as a problem to be solved. But is it really a problem? Let's delve deeper.What does it take to achieve a project timeline….Prima facie, for any milestone date to be achieved, two conditions must be met. Both conditions are necessary for the achievement of target milestone dates:Necessary Condition 1 - The initial estimation of the milestone date at project start is reasonably accurate.Necessary Condition 2- Project teams execute the project efficiently.<figure class="image"><img style="aspect-ratio:2039/1411;" src="https://backend.vectorconsulting.in/storage/editor_uploads//necessaryconsitions_1726307399.png" width="2039" height="1411"></figure>Why is the NC1 (Estimate project duration correctly) condition necessary? – Because if timelines estimated at the start of a project are not accurate, even if the project is executed at the fastest possible speed, it may still not ensure the achievement of those timelines.Why is NC2 (Execute project efficiently) a necessary condition? - Because even if the timelines are accurate, the project teams would still be unable to achieve timelines if they do not execute efficiently.The paradoxWhich of the above two conditions are being met in a specific scenario is surprisingly difficult to find out! Why?Let's say a project achieved the timelines set for it. A quick analysis will show that the timelines could have been completed under any of the following conditions:<ol><li>Both NC1 (Estimate project duration correctly) and NC2 (Execute project efficiently) are valid- in other words, the initial estimate was correct, AND the project teams worked efficiently to execute it.</li><li>NC1(Estimate project duration correctly) is false, but NC2 (Execute project efficiently) is true- the initial estimate was too aggressive (read: wrong). Still, the execution team made extraordinary efforts to achieve them and were successful in the end.</li><li>Both NC1 (Estimate project duration correctly) &amp; NC2 (Execute project efficiently) are false, as explained in the following scenarios –<ol><li>The initial estimates needed to be corrected/aggressive, and the teams could achieve them, but only by cutting corners on the scope.</li><li>The initial estimates were wrong/buffered; therefore, the execution teams, though inefficient, could still achieve the timelines.</li></ol></li></ol>What is fascinating about the above analysis is that there are three scenarios, but there is no way to determine which scenario out of a, b, or c is active in any given case!The initial estimates may have been either accurate or inaccurate, and the projects may have been executed efficiently or inefficiently- yet the timelines can be met! Meeting of timelines is indicative of one of the possible combinations mentioned in scenarios a, b and c but does not isolate any of the two conditions as a cause.&nbsp;It's worth repeating this statement differently - a project may achieve its timelines. However, it still does not clarify whether that was due to accurate estimates of timelines at project start execution speed or both!Now, let's look at the other possibility. Let's say that a project was NOT able to achieve its timelines. The project milestones may not have been achieved under any of the following conditions:<ol><li>NC1 (Estimate project duration correctly) is false &amp; NC2 (Execute project efficiently) is accurate. Although the teams worked extremely efficiently &amp; productively to deliver the projects, the initial estimates themselves were off/inaccurate. There could have been scenarios like uncertainty in delivery times, scope creep, etc., that were not foreseen in the initial estimates.</li><li>NC1 (Estimate project duration correctly) is valid &amp; NC2(Execute project efficiently) is false- although the timelines were reasonably accurate, project teams dropped the ball at various points during the project. The efficiency of project execution left a lot to be desired.</li><li>Both NC1 (Estimate project duration correctly) &amp; NC2 (Execute project efficiently) are false- the initial estimates were inaccurate. The execution efficiency could have been better, which somehow led to failure in meeting milestone dates.</li></ol>Again, we observed a similar result! We do not know which of the three scenarios were active (a, b, or c). The non-achievement of timelines does not indicate either estimation inaccuracy or execution inefficiency. All possibilities are open even after looking at the metrics! However, most people arrive at (b) as the only conclusion if a timeline is missed!Closing the loop on the initial claim made and going back to the initial relationship that we drew:<figure class="image"><img style="aspect-ratio:2039/1411;" src="https://backend.vectorconsulting.in/storage/editor_uploads//necessaryconsitions_1726307451.png" width="2039" height="1411"></figure>The above relationship is accurate but also misleading! This means that NC1 and NC2 must be true simultaneously to meet the timelines. However, people tend to implicitly assume NC1 as accurate by default and rush to conclusions about NC2 if the timelines are met/are not met.Therefore, what's the point of looking at milestone timeline achievements when they do not deliver any insight?As a matter of fact, milestones do have one essential function.Using milestones as a means to synchronize efforts across the organizationA project typically requires a coordinated effort across multiple teams, each contributing different skills and resources to achieve a common goal. These teams can be internal or external (such as suppliers, outsourced entities, or supply chain partners). In many cases, these teams are geographically dispersed and may work on other projects simultaneously, many unrelated to the project at hand.In such a complex environment, effective collaboration and synchronization among teams is crucial, especially during critical stages of the project. This means that each team must be ready and available to receive and act on inputs from other teams at the right time. However, this can be challenging in a multi-project environment where each team has its own set of priorities and timelines.Time &amp; scheduling becomes a beneficial ally if used appropriately, in such environments.Knowing the timing of future milestones is crucial for teams to prepare and align their efforts within a project effectively. When teams know when key milestones are expected to occur, they can proactively engage in preparatory activities, ensuring that everything is in place when moving forward.For example, suppose a process engineering team knows a particular build will likely happen on a specific date. In that case, they can ensure that all necessary equipment, such as rigs, jigs, fixtures, tools, consumables, etc., are ready in advance. By preparing everything beforehand, the team can immediately begin work once the parts arrive from suppliers, minimizing downtime and potential delays.Additionally, knowing milestone dates allows teams to give specialized resources and a heads-up before their involvement is required. This ensures that the right people are available and can allocate their time effectively. When teams are prepared and synchronized with the project's timeline, the overall efficiency and effectiveness of the project are greatly enhanced.What milestones cannot do?Organizations, though, have another need which they try to fulfil by looking at milestone achievements. There is a need to monitor the execution efficiency on an ongoing basis so that they can take measures to improve the efficiency if they see it dropping. As mentioned earlier, this need cannot be satisfied by looking at milestone achievements.Is there another way to assess the execution efficiencies that do not rely on the previous faulty technique? Looks like there is one.If we could assess the execution efficiencies differently, then the need to use timelines to monitor the same would be reduced. Additionally, by taking steps to enhance execution efficiency whenever a decline is observed, we can achieve the fastest possible lead times in product development.The only reason we would still want to look at timelines would be to understand when the project will likely be delivered so that appropriate communication is passed on to stakeholders.&nbsp;Factors determining execution efficiencies on a projectThe following measures, if taken on an ongoing basis, will help us determine whether teams executing the projects are doing so efficiently:<ul><li>Monitoring resource utilization in teams</li><li>Monitoring the quality of output being delivered by teams (including intermediate outputs)</li><li>Monitoring &amp; fostering communication &amp; collaboration across teams</li></ul>If we take the above three measures and proactively resolve issues related to these, we would have ensured that projects are constantly being executed efficiently.The three measures mentioned are about asking the right questions while a project is being executed.1. Resource utilization - Efficiently executed projects make the most available resources. The following questions to be asked on an ongoing basis during project reviews will help us assess this factor and mitigate it:<ol><li>Is the project waiting for resources in any team?</li><li>If yes, how long is it likely to wait (in days or weeks)?</li><li>Is the waiting time beyond the tolerance limit?</li><li>What can we do to quickly address the situation?</li></ol>When put in place, a mechanism of Daily Work Management helps team leaders ask those questions of their team members almost daily.This mechanism includes breaking down tasks being executed by teams into smaller activities, monitoring the completion rate of the smaller activities and comparing it with the arrival rate of newer inputs to compute the waiting times. When the waiting times are too high, they can be resolved by adding more resources (from other teams or from outside) or re-engineering the processes in this team to crash the processing times.2. Quality of work - Delivering high-quality work that meets or exceeds expectations without excessive rework &amp; late revisions is another sign of efficiency.<ol><li>Excessive rework- Too often, in a project environment, we see revisions resulting from "foresight errors"- errors that could have been avoided if due process had been followed. These errors are caused by shortcuts taken under time pressure.</li><li>Late revisions- Late revisions happen when the pressure of time forces teams to postpone the scope of work to the following phases. This work typically accumulates in the final phase of a project because there is no more phase to postpone, leading to late revisions.</li></ol>The following questions, when asked on an ongoing basis during project reviews, help us assess this factor and mitigate it:<ul><li>What are all the steps required to complete an activity? Are the steps being followed?</li><li>What are the deviations being taken while performing an activity? Are these justifiable?</li><li>Are we handing over half-done work to the teams downstream?</li></ul>Again, the Daily Work Management mechanism ensures continuous oversight of processes followed and the intermediate outputs delivered by teams. Task breakdowns into activities, as mentioned earlier, help track the thoroughness of the work being done before handing it over to other teams.3. Communication and collaboration - Efficient projects benefit from clear, open communication among team members and stakeholders. Strong collaboration helps avoid misunderstandings and ensures alignment across the project. For this to happen, it is essential to synchronize priorities across the organization so that teams find common cause in working together on individual projects. Too often, we see teams prioritizing different projects while at work, leading to long waiting times when one team needs the support of another team.Mechanisms must be implemented to ensure no misalignment in priorities while different teams are executing projects.Teams are encouraged to raise issues or "support requests" on each other. The problems could be related to the physical integration of parts designed by different teams, functional integration of parts/sub-systems from various teams, and lack of clarity in inputs. Once the issues are raised, the mechanisms we put in place help us monitor and resolve them as soon as possible.ConclusionA proactive process of execution monitoring is the only way to identify issues and inefficiencies as they crop up and address them. It also serves as a way of acknowledging and rewarding the efforts of execution teams irrespective of whether they achieved the timelines set at or before the project starts.Since proactive measures are taken continuously to ensure the efficient execution of projects on a day-to-day basis, projects are completed as soon as possible. Teams which are not executing efficiently are found out through this process and evaluated accordingly.Under such conditions, timeline estimations are still done, but they serve their only purpose of synchronizing the efforts across internal &amp; external stakeholders. The very mechanisms established to measure flow and efficiencies as part of daily work management are also used to estimate the expected achievement of timelines. After breaking down tasks into smaller activities and tracking their completion daily, the progress of activities across various teams on a project can be consolidated. This roll-up provides insight into whether project timelines are on track and, if not, highlights potential delays.&nbsp;

Delve into the complexities of new product development project delays. Unmask the true meaning of missed milestones through an in-depth analysis of timeline management and team dynamics, offering strategic solutions to enhance project success.

Unravelling the blame game in NPD project management

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Fashion forward: Navigating supply chain challenges in apparel retail

When postmortem reviews are made of rampant order delays and the consequent customer complaints, at any typical pharmaceutical company, it is common for manufacturing teams to point fingers at Quality Control (QC)1. This could be for lack of timely availability of tested raw materials, holdup owing to delays in in-process testing, or for dispatch delays due to pending finished batch releases.&nbsp;Stricter tracking of the performance matrices of each section in QC is the usual strategy arrived at to prevent the situation from arising again. However, this does not only address the root cause of these problems but also triggers a vicious loop of actions that aggravates them. Let us see how.&nbsp;QC performance metrics and their impactAt the heart of QC's performance evaluation lie two critical metrics: Service Level (Turnaround Time - TAT2) and Efficiency. TAT encompasses not only the actual testing time but also the time required for any campaign formation and is managed with SLAs (Service level agreements) for the testing protocols. Failure to meet TAT SLAs in some tests in this highly regulated industry, with stringent quality standards and regulations can even lead to non-compliance with regulatory requirements. And any violation involves significant scrutiny, laborious documentation of the deviations, and corrective actions taken. Moreover, TAT is often linked to vendor payments3 and enables the department to serve the manufacturing process in a timely manner. So, this parameter is closely monitored.&nbsp;Efficiency, on the other hand, quantifies the quantity of samples released relative to the available resources within a given month. With a growing backlog of samples to be cleared with limited resources, this parameter too is of paramount interest. Moreover, improved efficiency often leads to cost savings4 and also generally translates into shorter TAT for sample testing.&nbsp;SLAs or TAT commitments underscore the importance of testing pending samples promptly after these are received. This is because it is strongly held that if QC begins testing early, it will be able to release the sample on or before the target date.&nbsp;However, increasing campaign size is seen as a means to enhance efficiency by making the most of existing resources. Let’s take a hypothetical example to understand how this works.&nbsp;Let’s say planner Ajay is having 2 batches of product X on day 1 and another batch is going to come in QC on day 5. Ajay has 2 options.&nbsp;<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//m1_1710145946.png" width="2084" height="2084"></figure>As can be seen in this example, a typical test only needs a small amount of extra capacity to release an additional sample. So, the output from the same resources increases dramatically if QC increases batching or forms campaigns.&nbsp;But waiting to form testing campaigns can sometimes be time-consuming. Further, once these campaigns are planned, lab planners open multiple samples in an effort to optimize the testing process. This creates a significant level of Work-in-Progress (WIP) within the lab. This is planned fori and wouldn’t be an issue if all goes well. However, things don’t go as planned. For instance, fluctuations in the monthly production plan, in response to market changes, can force the Quality Control (QC) department to redirect its resources towards urgent samples needed for immediate production in RM testing. The new tests required adds to the existing WIP, increasing Work-in-Progress (WIP) and prolonging lead times. To compound matters, operational inefficiencies like instrument breakdowns, absenteeism, and the need for retesting due to Quality Management System (QMS) issues, priority changes to tests needed to help expedite vendor payments can disrupt workflow. These disruptions result in a growing number of pending samples, leading to increased delays in the release process and a rise in Turnaround Time (TAT). The tested RM output from QC too is poor.&nbsp;<figure class="image"><img style="aspect-ratio:2083/2083;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//m1_1710149066.jpg" width="2083" height="2083"></figure>While the extent of problems is less pronounced, similar issues persist in both in-process testing and finished goods (FG) testing. In FG testing, Work in Progress (WIP) accumulates due to frequent changes in priorities prompted by the urgency to test samples with imminent airfreight deadlines. Conversely, in in-process testing, this occurrence may be attributed to emergent variability or quality failures. All these lead to the expansion of TAT/poor efficiency.&nbsp;When faced with these challenges and mounting complaints from the production team, management heightens its expectations of QC. They emphasize the need to simultaneously improve efficiency and TAT to regain control over the mounting delays.&nbsp;Core issueClearly at the crux of this vicious loop is the dilemma of the section planner who manages the show at QC faces. While he may want to start testing available samples in small batches in hand to meet the SLA, the need for efficiency drives him to wait and form large campaigns. This along with inherent uncertainties and variability results in long and variable lead times, hence the delays.&nbsp;<figure class="image"><img style="aspect-ratio:2083/2083;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//m2_1710149038.jpg" width="2083" height="2083"></figure>The way out!A viable solution becomes evident when we can precisely define the primary objective of the quality department within a pharmaceutical manufacturing facility. The quality department primarily serves as a support team, tasked with facilitating the timely production and dispatch of pharmaceuticals, all while maintaining rigorous compliance with regulatory standards and requirements, notably Good Manufacturing Practices (GMP). Consequently, while the efficiency is not to be dismissed, the primary focus of quality control (QC) is TAT.&nbsp;A support department like QC, is in fact, expected to operate with surplus capacity. Efforts to enhance efficiency through attempts to maximise capacity utilization in service departments or non-constraints by reducing resources or streamlining operations often risk transforming them into bottlenecks, ultimately hindering the overall performance of the system (in this case, the plant as a whole). This is because these departments may then lack the necessary capacity cushion to handle fluctuations in workload, which is a common occurrence in pharmaceutical manufacturing facilities.&nbsp;The variability in workload within the laboratory is not solely a result of fluctuations in production but is also influenced by various external factors, such as changes in Standard Operating Procedures (SOPs) mandated by regulatory authorities, global Corrective and Preventive Actions (CAPA) initiatives, and testing errors, among others. Therefore, the lab requires sufficient capacity to effectively accommodate these workload fluctuations. Clearly QC has to balance the need for efficiency with the primary need of ensuring TAT commitments.&nbsp;So, what can we monitor at each of the different QC labs to ensure that production/dispatch is never delayed due to the availability of tested material while also achieving good enough efficiency? What parameters should be observed to detect early signals of delays, and what can we track to drive continuous improvement in lab processes?&nbsp;As mentioned earlier, the solution lies in further defining the purpose of each type of QC laboratory.&nbsp;RM/PM Lab:&nbsp;The RM (Raw Material) lab has a clear purpose: to prevent production lines from experiencing shortages and to avoid delaying vendor payments. If the primary goal of the RM lab is to maintain a continuous supply of tested raw materials, its performance should be assessed based on how many days of production coverage it can consistently provide to each production line.&nbsp;Creating RM QC Buffer:To facilitate seamless dispensing irrespective of changes in the production plan, one can define the RM-QC cleared inventory level (norm) for each item that should be available at any given point in time in all the production lines. This buffer serves two purposes. First, it provides QC teams with clear and specific signals to prioritize which SKUs should undergo testing. The prioritization is based on the availability of tested raw materials (RM) for each production line. Consequently, this approach helps decouple QC from the daily urgencies of manufacturing.&nbsp;Secondly, monitoring of the buffer can give the central procurement visibility for replenishing them as consumption occurs. This ensures that procurement orders only what is necessary for the plant's operations, reducing the likelihood of SKUs being delivered but remaining unused. As a result, timely vendor payments can be made, and the RM lab can maintain focus without the constant switching between materials required for production and those needed for vendor payments.&nbsp;This decoupling both from manufacturing and from the demands of procurement, in turn, enables the RM QC department to allocate sufficient waiting time for strategic planning and efficient execution of testing campaigns, ultimately leading to a reduction in Turnaround Time (TAT).&nbsp;&nbsp;Finish Product and In-Process Lab:The purpose of the Finished Product (FP) and In-Process (IP) labs is to guarantee the availability of the necessary quantity of Quality Control (QC) approved finished products before the scheduled dispatch date. Days of dispatch coverage is then the primary metric of interest here.&nbsp;&nbsp;To achieve this high coverage, buffers for finished products (on similar lines to what was discussed for RM) can be established based on market demand. Both production and the FP/IP lab can align to these defined buffers to coordinate production and testing efforts. For this plant production can use replenishment signals provided by these buffers for production. Simultaneously, the FP/IP lab can ensure that a bank of QC-tested materials is consistently ready for dispatch from the plant.&nbsp;This decoupling both from manufacturing for IP and from the demands of dispatch for FG, allows the QC department to allocate sufficient waiting time for making testing campaigns, again, ultimately leading to a reduction in Turnaround Time (TAT).&nbsp;&nbsp;Stability Lab:The Stability lab functions uniquely compared to other labs as it operates independently of plant operations and maintains a consistent, predictable flow of samples. Its primary objective is to ensure that samples are tested within the specified time frames, as detailed in the Standard Operating Procedures (SOP) for stability testing. This approach reduces the need to report exceptions, making Turnaround Time (TAT) the most suitable metric for assessing the lab's performance.&nbsp;However, pharmaceutical companies often impose stricter timelines for stability sample testing compared to the guidelines set forth in Good Manufacturing Practice (GMP) by regulatory authorities. These tighter Service Level Agreements (SLAs) can hinder the stability lab's ability to plan testing campaigns effectively. As a result, the lab may be compelled to conduct tests under suboptimal campaign conditions, leading to significant inefficiencies without delivering substantial value within aggressive timelines. Therefore, enabling the stability lab to formulate campaigns while still adhering to regulatory requirements would enhance its overall effectiveness.&nbsp;ConclusionMindlessly adhering to industry-standard metrics for evaluating lab performance is a recipe for disaster. The wisest course of action is to tailor lab metrics to match the precise expectations for the lab. Once established continuous improvement in processes can focus on delivering better results in these new lab metrics. Remarkably, when this is done, both efficiency and Turnaround Time (TAT) emerge harmoniously, without any compromise.&nbsp;&nbsp;&nbsp;

Discover innovative solutions to resolve inherent conflicts in pharmaceutical quality control to streamline processes, overcome operational bottlenecks, and enhance efficiency.

Measurement conflict in pharma labs

When postmortem reviews are made of rampant order supply delays and the consequent customer complaints, at any typical pharmaceutical company, it is common for manufacturing teams to point fingers at Quality Control (QC)1. This could be due to lack of timely availability of tested raw materials, holdup owing to delays in in-process testing, or dispatch delays due to pending finished batch releases.&nbsp;&nbsp;Stricter tracking of the performance metrices of each section in QC is the usual strategy arrived at to prevent the situation from arising again. However, this does not only address the root cause of these problems but also triggers a vicious loop of actions that aggravates them. Let us see how.&nbsp;QC performance metrics and their impactAt the heart of QC's performance evaluation lie two critical metrics: Service Level (Turnaround Time - TAT2) and Productivity.&nbsp;TAT encompasses not only the actual testing time but also the time required for any campaign formation (waiting time) and is managed with SLAs (Service Level Agreements) with user departments for the testing protocols. Failure to meet TAT SLAs involves significant scrutiny from user departments to an extent where manufacturing starts leading the daily QC planning and leaves very little room for QC to decide for an optimum campaign. And when backlog/pendency increases, many times procurement team forces QC to release batches as significant delays are often linked to delays in clearing vendor payments and becoming a challenge for the department to supply subsequent lots to manufacturing in a timely manner.Productivity, on the other hand, quantifies the number of samples released relative to the available resources within a given month. With a growing backlog of samples to be cleared with limited resources, this parameter too is of paramount interest. Higher productivity helps lab to absorb external &amp; internal uncertainties without impacting any of the outcome metrics. Moreover, improved productivity often leads to cost savings as it helps running lab with fewer manpower (analyst) required.SLAs or TAT commitments underscore the importance of testing pending samples promptly after they are received. So, on one side, it is strongly held that if QC begins testing early, they will be able to release the sample on or before the target date.&nbsp;However, increasing campaign size is seen as a means to enhance productivity by making the most of existing resources. Let’s take a hypothetical example to understand how this works.Let’s say planner Ajay is having 2 batches of product X on day 1 and another batch is going to come in QC on day 5. Ajay has 2 options.&nbsp;<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//m1_1710145946.png" width="2084" height="2084"></figure>As can be seen in this example, a typical test only needs a small amount of extra capacity to release an additional sample. So, the output from the same resources increases dramatically if QC increases batching or forms campaigns.&nbsp;But, waiting to form testing campaigns can sometimes be time-consuming. Further, once these campaigns are planned, lab planners open multiple samples in an effort to optimise the testing process. This creates a significant level of Work-in-Progress (WIP) within the lab. This is planned fori&nbsp;and wouldn’t be an issue if all goes well. However, things don’t go as planned.For instance, fluctuations in the monthly production plan in response to market changes can force the Quality Control (QC) department to redirect its resources towards urgent samples needed for immediate production in RM testing. The new tests required add to the existing WIP, increasing Work-in-Progress (WIP) and prolonging lead times. To compound matters, operational inefficiencies like instrument breakdowns, absenteeism, and the need for retesting due to Quality Management System (QMS) issues, priority changes to tests needed to help expedite vendor payments can disrupt workflow. These disruptions result in a growing number of pending samples, leading to increased delays in the release process and a rise in Turnaround Time (TAT).<figure class="image"><img style="aspect-ratio:16669/11615;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1746016012.png" width="16669" height="11615"></figure>While the extent of problems is less pronounced, similar issues persist in both in-process testing and finished goods (FG) testing. In FG testing, Work in Progress (WIP) accumulates due to frequent changes in priorities prompted by the urgency to test samples with imminent airfreight deadlines. Conversely, in in-process testing, this occurrence may be attributed to emergent variability or quality failures. All these lead to the expansion of TAT/poor productivity &amp; dissatisfied manufacturing department.When faced with these challenges and mounting complaints from the production team, QC loses its control of productivity &amp; optimum campaigning and starts firefighting. Management heightens its expectations of QC. They emphasize the need to simultaneously improve productivity.Core issueClearly, at the crux of this vicious loop is the dilemma of the section planner who manages the show. While he may want to start testing available samples in small batches in hand to meet the SLA, the need for productivity drives him to wait and form large campaigns. This, along with inherent uncertainties and variability, results in long and variable lead times, hence the delays.&nbsp;<figure class="image"><img style="aspect-ratio:2083/2083;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//m2_1710149038.jpg" width="2083" height="2083"></figure>The way out!A viable solution becomes evident when we can precisely define the primary objective of the quality department within a pharmaceutical manufacturing facility. The quality department primarily serves as a support team, tasked with facilitating the timely production and dispatch of pharmace&nbsp; uticals, all while maintaining rigorous compliance with regulatory standards and requirements, notably Good Lab Practices (GLP). Consequently, while the productivity is not to be dismissed, the primary focus of quality control (QC) is TAT.&nbsp;A support department like QC is, in fact, expected to operate with surplus capacity. Efforts to enhance productivity through&nbsp;attempts to maximise capacity utilization in service departments or non-constraints by reducing resources or streamlining operations often risk transforming them into bottlenecks, ultimately hindering the overall performance of the system (in this case, the plant as a whole). This is because these departments may then lack the necessary capacity cushion to handle fluctuations in workload, which is a common occurrence in pharmaceutical manufacturing facilities.&nbsp;The variability in workload within the laboratory is not solely a result of fluctuations in production but is also influenced by various external factors, such as changes in Standard Operating Procedures (SOPs) mandated by regulatory authorities, global Corrective and Preventive Actions (CAPA) initiatives, and testing errors, among others. Therefore, the lab requires sufficient capacity to effectively accommodate these workload fluctuations. Clearly QC has to balance the need for efficiency with the primary need of ensuring TAT commitments.&nbsp;So, what can we monitor at each of the different QC labs to ensure that production/dispatch is never delayed due to the availability of tested material while also achieving good enough productivity? What parameters should be observed to detect early signals of delays, and what can we track to drive continuous improvement in lab processes?&nbsp;As mentioned earlier, the solution lies in further defining the purpose of each type of QC laboratory.&nbsp;RM/PM Lab:&nbsp;The RM (Raw Material) lab has a clear purpose: to prevent production lines from experiencing shortages and to avoid delaying vendor payments. If the primary goal of the RM lab is to maintain a continuous supply of tested raw materials, its performance should be assessed based on how many days of production coverage it can consistently provide to each production line.&nbsp;Ensuring adequate dispensing days cover for each line:Gaps in the availability of approved materials required for scheduled production should be derived. The sequence of the production schedule should guide the prioritisation of testing activities in the RM QC department. Planners should be permitted to campaign as many lots as possible, provided that the testing sequence aligns with production requirements. RM QC should strive to maintain dispensing coverage for each production line equivalent to 2 to 3 weeks of operations. This buffer will provide the flexibility needed to accommodate urgent release requirements arising from changes in the production schedule driven by market dynamics.Secondly, monitoring a separate buffer of tested and yet-to-be-tested material in plant can give the central procurement visibility for replenishing them as consumption occurs. This ensures that procurement orders only what is necessary for the plant's operations, reducing the likelihood of SKUs being delivered but remaining unused. As a result, timely vendor payments can be made, and the RM lab can maintain focus without the constant switching between materials required for production and those needed for vendor payments.&nbsp;This decoupling both from manufacturing and from the demands of procurement, in turn, enables the RM QC department to allocate sufficient waiting time for strategic planning and efficient execution of testing campaigns, ultimately leading to a reduction in Turnaround Time (TAT).&nbsp;Finish Product and In-Process Lab:The purpose of the Finished Product (FP) and In-Process (IP) labs is to guarantee the availability of the necessary quantity of Quality Control (QC) approved finished products before the scheduled dispatch date. Days of dispatch coverage is then the primary metric of interest here.To achieve this high coverage, buffers for finished products (on similar lines to what was discussed for RM) can be established based on market demand. Both production and the FP/IP lab can align to these defined buffers to coordinate production and testing efforts. For this, plant production can use replenishment signals provided by these buffers for production. Simultaneously,&nbsp;the FP/IP lab can view the demand and align with ‘right’ campaigning to ensure timely releases for both production &amp; dispatches.&nbsp;This decoupling, both from manufacturing for IP and from the demands of dispatch for FG, allows the QC department to allocate sufficient waiting time for making testing campaigns, again ultimately leading to a reduction in Turnaround Time (TAT) while ensuring maximum productivity.Stability Lab:The Stability lab functions uniquely compared to other labs as it operates independently of plant operations and maintains a predictable flow of samples. Its primary objective is to ensure that samples are tested within the specified time frames, as detailed in the Standard Operating Procedures (SOP) for stability testing. This approach reduces the need to report exceptions, making Turnaround Time (TAT) the most suitable metric for assessing the lab's performance.&nbsp;However, pharmaceutical companies often impose stricter timelines for stability sample testing compared to the guidelines set forth in Good Lab Practice (GLP) by regulatory authorities. These tighter Service Level Agreements (SLAs) can hinder the stability lab's ability to plan testing campaigns effectively. As a result, the lab may be compelled to conduct tests under suboptimal campaign conditions, leading to significant inefficiencies without delivering substantial value within aggressive timelines. Therefore, enabling the stability lab to formulate campaigns while still adhering to regulatory requirements would enhance its overall effectiveness.&nbsp;ConclusionMindlessly adhering to industry-standard metrics for evaluating lab performance is a recipe for disaster. The wisest course of action is to tailor lab metrics to match the precise expectations for the lab. Once established, continuous improvement in processes can focus on delivering better results for these new lab metrics.Remarkably, when this is done, both productivity and Turnaround Time (TAT) emerge harmoniously, without any compromise.&nbsp;

How can Indian CROs reduce the number of observations and deviations observed during the studies by 40%-50% and generate the final integrated report 25%-35% faster with the same resources while protecting the quality of reports? Find out

Agile CROs can fly high

New products are vital for the growth of companies. Increased competition from other companies, changing consumer behaviour, advancements in technology, ensuring freshness of product offerings, diversification of risk, etc. are some of the reasons why new products have to be launched.&nbsp;In environments where market dynamics are rapidly changing, a company is considered healthy and growing only if at least 25%-30% of their overall sales is accrued from their new productsi. This is expected to be significantly higher for companies that deal with lifestyle or technology products. So, firms put in a lot of effort into understanding the market and try to continuously develop new products. However, according to research by Clayton Christensen, Harvard Business School Professor and renowned author, over 30,000 new products are introduced into the market every year, and 95% of them failii.<figure class="image"><img style="aspect-ratio:1000/1000;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//1_1712575368.png" width="1000" height="1000"></figure>What is often not realized is that the success of any new product is dependent not only on its ideation and development stage, but also on the way it is launched in the market. Even a revolutionary product can fail. 75% of consumer-packaged goods and retail products fail to reach the minimum sales expectations after launch. And products that start out strong may also have trouble sustaining success.&nbsp;This article will examine the challenges companies face while launching a new product and the tactics needed to ensure that new products of a company have the best opportunity to succeed and sustain in the market.&nbsp;NPL – The ChallengesWhile there could be numerous reasons for products to fail (e.g. legal issues, socio-cultural mismatch, product falls short of claims, etc.), the major cause of failure, for otherwise acceptable new products, tend to be associated with scaling up or rolling out.&nbsp;So, if we did a postmortem of a typical failed product, you are likely to see the following issues:<ul><li>Lack of visibility on the shelves at retail counters: The newly launched product is not getting the right placements (both in terms of quantum and the type of outlet), or after getting the required placements, they are not getting the right visibility. (Note: Products are usually launched with considerable fanfare, ATL/BTL activities to support it. But even if these succeed in catching the customer’s attention, in most cases these customers will not go beyond their regular, known outlets to try and buy this product).</li><li>Customers could not get the product in many places: Even though the product could be placed in relevant retail outlets and made visible, it became unavailable very soon, and the vast majority of customers never got the chance to even see it (let alone buy it)</li><li>Delay in addressing the feedback received from the market: There were pockets of customers giving feedback about the new product/ processes that, if included, could have prevented the demise of the product. However, the company could not act on this in time.</li><li>Customers could not get sufficient product information: Customers did not get a chance to understand how to use the product (a new product category), or the customers did not understand the products’ new features. This led to a loss of interest from consumers.&nbsp;</li></ul>These indicate that if you don’t scale your supply chain quickly, become available consistently, course correct where needed and grab customer loyalty, your product is toast. Further, your competition may launch its own version and walk away with the market. But how can we ensure that these issues don’t happen during/after launch?To identify a solution, we must first understand the nature of new product launches in greater detail.What is the real issue?The most important characteristic of new product launches is that the consumer’s response to the new product is uncertain. Even though the product may have gone through a market research phase, reality is the only true test of consumer willingness to adopt a new product, and there is no trend data available to predict potential sales.&nbsp;<figure class="image"><img style="aspect-ratio:1000/1000;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//2_1712575404.png" width="1000" height="1000"></figure>Because of this, companies are in perpetual dilemma when it comes to launching a new product – ‘Do they take a cautious approach and launch the product in a select few territories, or do they adopt the big bang strategy and launch it across all their POS?’. Both have pros and cons. A smaller launch allows companies to test the trend in demand. Moreover, incorporating any changes to the product or processes without affecting the brand’s reputation is easier if the initial launch is limited. However, a big bang launch means companies can enjoy the first mover advantage in all geographies and increase all sales opportunities before the competition gets an inkling.&nbsp;However, very often, this choice is taken out of the hands of companies. Delays in new product development of the products and the threat of missing the appropriate timing/launch window (could be the beginning of a season, a festival, etc.) result in pressure to launch the product when it is ready across as many territories as possible. The risks of this are easily imaginable, though. The bigger the scale of the launch, the higher the level of uncertainty of demand. The sales team also has to be proportionately bigger to cater to this scale of launch. With very little time available to impart proper training to the sales team, the USP of the product is not effectively communicated to the potential consumer of the product. Moreover, there is very little focus on responding to the feedback provided by the consumers. And, in this rush, the supply chain has also not been equipped to respond to demand fluctuations. This increases the possibility of product shortages in some areas where it is selling well (even though it is available in excess in other parts of the supply chain). Patchy availability of the products eventually puts off consumers. This leads to poor adoption of the product and the company discarding the product as unpopular.&nbsp;Product failures create a vicious cycle for companies – as products fail more often than not, there is greater pressure to develop more new products to ensure the company’s growth! So, finding a way to address these challenges and improve the typical hit ratio of product launches is imperative.&nbsp;<figure class="image"><img style="aspect-ratio:1000/1000;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//3_1712575424.png" width="1000" height="1000"></figure>Direction of SolutionIt is clear that reducing the extent of demand uncertainty during a new product launch will help improve its effectiveness. The best way to reduce uncertainty to have better control over the supply chain/sales team readiness is to launch new products in a phased manner - i.e., stagger the rollout across territories/POS.&nbsp;Ensuring the effectiveness of new product launches&nbsp;Staggering the rollout across territories/POS helps companies take the required steps to ensure the effectiveness of new product launches:&nbsp;<ol><li>Reduces demand uncertainty by testing the product: For this, the territories and POS should be selected in such a manner that there is adequate representation; this will allow the company to check whether the product is working in those areas before a full roll-out. Care also has to be taken to ensure that the product is displayed well (by defining the percentage of capital and space for the new product) and that there is continuous availability of the new product at the POS.</li><li>Align the supply chain in line with expected demand: This is because when the roll-out is phased out:</li><li>Manufacturing capacity can be stepped up slowly and aligned in line with the demand.</li><li>The distribution channel can ensure adequate stocks for display and repeat sales where there are more sales.</li><li>There is now even the possibility to ensure buffer capacity to manage any sudden spike in demand.</li><li>Provide adequate training: With this approach, challenges and overheads related to training will also come down. A relatively smaller sales team to be trained before launch, and so the quality of the training improves, and one can expect improved adherence to your sales strategy, communication guidelines, etc.</li><li>Capacity to analyse and respond to the feedback: In a staggered roll-out, the system has enough capacity to focus on and respond to the feedback provided by the early consumers for both the product and the marketing collaterals. This can help limit the exposure of the product’s issues to a small set of customers, thereby, preventing a negative perception of the new product to a wider audience. One also will have the agility to resolve these issues in a timely manner, resulting in greater customer satisfaction levels with the new product. Collecting and responding to information on marketing collaterals can help align the marketing spends as per market requirements.&nbsp;</li></ol>Next stepsThe learnings gained from one roll-out to be transferred to the next roll-out. And the sales team already trained on the product initially can be utilised to further train other teams in other territories during this scale-up. Thus, the entire sales team will be better trained to communicate the product’s USP/features effectively and help customers adopt the product. Moreover, since the company can implement customer feedback into the product and processes in a timely manner, the brand can quickly gain customer trust and loyalty.&nbsp;When more and more products are launched successfully, the pressure on NPD comes down, and they can work in a more focused manner on a more considered number of new products. This will allow them to help launch products in a timely manner reducing pressure on having to take a big bang approach to new product launches.&nbsp;What to expect?Implement this new product launch strategy and significant improvement in the success ratio of new product launches is virtually guaranteed (at least 30% improvement in the number of hits), and the company can expect ~ 50% increase in the contribution of new products into overall sales. Once consistent availability of the products across all potential outlets continues to be assured, find out how by clicking on this <a target="_blank" rel="noopener noreferrer" href="http://new-stage.vectorconsulting.in/en/research-and-publication/articles/managing-distribution-chain-is-there-a-better-way-than-gazing-the-crystal-ball/">link</a>, the product life of each new product is also expected to improve, accruing more returns for the company.&nbsp;&nbsp;&nbsp;

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According to research, ~95% of new product launches fail. How can companies improve the success rate of their new product launches?

Acing new product launches

New products are vital for the growth of companies. Increased competition from other companies, changing consumer behaviour, advancements in technology, ensuring freshness of product offerings, diversification of risk, etc. are some of the reasons why new products have to be launched.&nbsp;In environments where market dynamics are rapidly changing, a company is considered healthy and growing only if at least 25%-30% of their overall sales is accrued from their new productsi. This is expected to be significantly higher for companies that deal with lifestyle or technology products. So, firms put in a lot of effort into understanding the market and try to continuously develop new products. However, according to research by Clayton Christensen, Harvard Business School Professor and renowned author, over 30,000 new products are introduced into the market every year, and 95% of them failii.<figure class="image"><img style="aspect-ratio:4000/3490;" src="https://backend.vectorconsulting.in/storage/editor_uploads//cg-article-1-img1_1733797723.jpg" width="4000" height="3490"></figure>What is often not realized is that the success of any new product is dependent not only on its ideation and development stage, but also on the way it is launched in the market. Even a revolutionary product can fail. 75% of consumer-packaged goods and retail products fail to reach the minimum sales expectations after launch. And products that start out strong may also have trouble sustaining success.&nbsp;This article will examine the challenges companies face while launching a new product and the tactics needed to ensure that new products of a company have the best opportunity to succeed and sustain in the market.&nbsp;NPL – The ChallengesWhile there could be numerous reasons for products to fail (e.g. legal issues, socio-cultural mismatch, product falls short of claims, etc.), the major cause of failure, for otherwise acceptable new products, tend to be associated with scaling up or rolling out.&nbsp;So, if we did a postmortem of a typical failed product, you are likely to see the following issues:<ul><li>Lack of visibility on the shelves at retail counters: The newly launched product is not getting the right placements (both in terms of quantum and the type of outlet), or after getting the required placements, they are not getting the right visibility. (Note: Products are usually launched with considerable fanfare, ATL/BTL activities to support it. But even if these succeed in catching the customer’s attention, in most cases these customers will not go beyond their regular, known outlets to try and buy this product).</li><li>Customers could not get the product in many places: Even though the product could be placed in relevant retail outlets and made visible, it became unavailable very soon, and the vast majority of customers never got the chance to even see it (let alone buy it)</li><li>Delay in addressing the feedback received from the market: There were pockets of customers giving feedback about the new product/ processes that, if included, could have prevented the demise of the product. However, the company could not act on this in time.</li><li>Customers could not get sufficient product information: Customers did not get a chance to understand how to use the product (a new product category), or the customers did not understand the products’ new features. This led to a loss of interest from consumers.&nbsp;</li></ul>These indicate that if you don’t scale your supply chain quickly, become available consistently, course correct where needed and grab customer loyalty, your product is toast. Further, your competition may launch its own version and walk away with the market. But how can we ensure that these issues don’t happen during/after launch?To identify a solution, we must first understand the nature of new product launches in greater detail.What is the real issue?The most important characteristic of new product launches is that the consumer’s response to the new product is uncertain. Even though the product may have gone through a market research phase, reality is the only true test of consumer willingness to adopt a new product, and there is no trend data available to predict potential sales.&nbsp;<figure class="image"><img style="aspect-ratio:4000/3190;" src="https://backend.vectorconsulting.in/storage/editor_uploads//cg-article-1-img-2_1733797733.jpg" width="4000" height="3190"></figure>Because of this, companies are in perpetual dilemma when it comes to launching a new product – ‘Do they take a cautious approach and launch the product in a select few territories, or do they adopt the big bang strategy and launch it across all their POS?’. Both have pros and cons. A smaller launch allows companies to test the trend in demand. Moreover, incorporating any changes to the product or processes without affecting the brand’s reputation is easier if the initial launch is limited. However, a big bang launch means companies can enjoy the first mover advantage in all geographies and increase all sales opportunities before the competition gets an inkling.&nbsp;However, very often, this choice is taken out of the hands of companies. Delays in new product development of the products and the threat of missing the appropriate timing/launch window (could be the beginning of a season, a festival, etc.) result in pressure to launch the product when it is ready across as many territories as possible. The risks of this are easily imaginable, though. The bigger the scale of the launch, the higher the level of uncertainty of demand. The sales team also has to be proportionately bigger to cater to this scale of launch. With very little time available to impart proper training to the sales team, the USP of the product is not effectively communicated to the potential consumer of the product. Moreover, there is very little focus on responding to the feedback provided by the consumers. And, in this rush, the supply chain has also not been equipped to respond to demand fluctuations. This increases the possibility of product shortages in some areas where it is selling well (even though it is available in excess in other parts of the supply chain). Patchy availability of the products eventually puts off consumers. This leads to poor adoption of the product and the company discarding the product as unpopular.&nbsp;Product failures create a vicious cycle for companies – as products fail more often than not, there is greater pressure to develop more new products to ensure the company’s growth! So, finding a way to address these challenges and improve the typical hit ratio of product launches is imperative.&nbsp;<figure class="image"><img style="aspect-ratio:4000/3810;" src="https://backend.vectorconsulting.in/storage/editor_uploads//cg-article-1-img-3_1733797754.jpg" width="4000" height="3810"></figure>Direction of SolutionIt is clear that reducing the extent of demand uncertainty during a new product launch will help improve its effectiveness. The best way to reduce uncertainty to have better control over the supply chain/sales team readiness is to launch new products in a phased manner - i.e., stagger the rollout across territories/POS.&nbsp;Ensuring the effectiveness of new product launches&nbsp;Staggering the rollout across territories/POS helps companies take the required steps to ensure the effectiveness of new product launches:&nbsp;<ol><li>Reduces demand uncertainty by testing the product: For this, the territories and POS should be selected in such a manner that there is adequate representation; this will allow the company to check whether the product is working in those areas before a full roll-out. Care also has to be taken to ensure that the product is displayed well (by defining the percentage of capital and space for the new product) and that there is continuous availability of the new product at the POS.</li><li>Align the supply chain in line with expected demand: This is because when the roll-out is phased out:</li><li>Manufacturing capacity can be stepped up slowly and aligned in line with the demand.</li><li>The distribution channel can ensure adequate stocks for display and repeat sales where there are more sales.</li><li>There is now even the possibility to ensure buffer capacity to manage any sudden spike in demand.</li><li>Provide adequate training: With this approach, challenges and overheads related to training will also come down. A relatively smaller sales team to be trained before launch, and so the quality of the training improves, and one can expect improved adherence to your sales strategy, communication guidelines, etc.</li><li>Capacity to analyse and respond to the feedback: In a staggered roll-out, the system has enough capacity to focus on and respond to the feedback provided by the early consumers for both the product and the marketing collaterals. This can help limit the exposure of the product’s issues to a small set of customers, thereby, preventing a negative perception of the new product to a wider audience. One also will have the agility to resolve these issues in a timely manner, resulting in greater customer satisfaction levels with the new product. Collecting and responding to information on marketing collaterals can help align the marketing spends as per market requirements.&nbsp;</li></ol>Next stepsThe learnings gained from one roll-out to be transferred to the next roll-out. And the sales team already trained on the product initially can be utilised to further train other teams in other territories during this scale-up. Thus, the entire sales team will be better trained to communicate the product’s USP/features effectively and help customers adopt the product. Moreover, since the company can implement customer feedback into the product and processes in a timely manner, the brand can quickly gain customer trust and loyalty.&nbsp;When more and more products are launched successfully, the pressure on NPD comes down, and they can work in a more focused manner on a more considered number of new products. This will allow them to help launch products in a timely manner reducing pressure on having to take a big bang approach to new product launches.&nbsp;What to expect?Implement this new product launch strategy and significant improvement in the success ratio of new product launches is virtually guaranteed (at least 30% improvement in the number of hits), and the company can expect ~ 50% increase in the contribution of new products into overall sales. Once consistent availability of the products across all potential outlets continues to be assured, find out how by clicking on this <a target="_blank" rel="noopener noreferrer" href="http://new-stage.vectorconsulting.in/en/research-and-publication/articles/managing-distribution-chain-is-there-a-better-way-than-gazing-the-crystal-ball/">link</a>, the product life of each new product is also expected to improve, accruing more returns for the company.&nbsp;&nbsp;&nbsp;

&nbsp;<h5>The dilemma of the CEO of a real estate major</h5>Mr. Mahindra Kumar, CEO of Blu Homes, a major residential real estate company in India, was facing a dilemma. He was under pressure to quickly improve the internal rate of return (IRR) of his projects. The problem was “how”.&nbsp;Even before the pandemic dealt a painful blow, the pressure on the real estate sector was evident to all [1]. Post-2013, sales of Blu Homes had stalled, unsold inventory had piled up, and the Internal Rate of Return (IRR) from the projects had dropped from 18%-21% realised between 2007-11 to 13%-17%; moreover, the debt burden had more than trebled over the same period.&nbsp;The good news, however, was that his company had emerged whole from the COVID phase. Much of the inventory could be sold even during this time because of government subsidy support [2]. Post-COVID the company was now achieving YoY sales growth of 68%. Over the past two years Tier 2 and Tier 3 cities had emerged as hot spots for them, and they were setting unprecedented sales benchmarks.&nbsp;Despite the global economic slowdown, this positive momentum was expected to continue, and the sector is projected to grow to one trillion US dollars by 2030 (see figure below [3]).&nbsp;<figure class="image"><img style="aspect-ratio:16668/11858;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-1-01_1732343241.jpg" width="16668" height="11858"></figure>What more, there was a prevailing demand-supply gap in all segments (see figure below [4]).&nbsp;<figure class="image"><img style="aspect-ratio:16668/12757;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-1_1732343548.jpg" width="16668" height="12757"></figure>Naturally, the board of Blu Homes saw this as a clear opportunity to mop up this demand, recoup the business, put its profits on a growth trajectory and offer healthier returns. The threat was always there that if the company continued to only make IRR to the tune of 13-17% in its projects, investors might pull out. So, the pressure was now on Mr. Mahindra Kumar to ensure a significant jump in IRR. However, he was not sure how. For improving IRR, it was not enough to improve sales; in addition, Blu Homes must ensure that, while delivering each project, they&nbsp;1. Reduce costs and improve margins&nbsp;2. Improve cash flow by faster billing&nbsp;The key to both of these is primarily the timely completion of projects. If projects are finished on time as planned, customers can be billed faster, and un-budgeted expenses due to project elongation can be avoided.&nbsp;The irony was that Blu Homes has ALWAYS delivered projects on or before the promised deadlines (protected by the Real Estate Regulatory Authority - RERA). However, the company rarely met the targeted IRR in these projects, even during the ‘good times’. And this was not only true for Blu Homes - it is an industry-wide phenomenon!&nbsp;To understand why this happens, one needs to understand how companies in this unique environment typically function.&nbsp;The typical way of project management in a real estate projectProjects in the Real Estate industry in India start off with three due/completion dates! Strange, but true. With the government bringing in RERA laws that impose stringent penalties on developers for delays in finishing projects, the industry has come up with RERA due dates, which are significantly buffered to avoid being penalised [5]. Another due date is the internally budgeted due date, which, if met, meets the IRR targets set by the developer. The third due date, which is ‘informally’ promised to end customers, is somewhere in between these two.&nbsp;So, why does the industry use these 3 due dates? The reason is that real estate is an industry plagued with project delays and unfulfilled promises. Recent research has indicated that, despite conservative and buffered dates, as many as 500,000 Homes worth Rs. 4.48 lakh crores are stuck in just seven micro markets of India [6].&nbsp;<figure class="image"><img style="aspect-ratio:16668/18669;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-2-01-01_1732343964.jpg" width="16668" height="18669"></figure>With such delays being the norm rather than the exception, developers know that they have to buffer any external commitment in order to maintain their reputation and gain or maintain market share.Why should there be delays, one may ask?If you ask any developer about delays, you will be met with a laundry list of reasons, most of them pointing to some external agency and hence, unavoidable. Interestingly, each of the agencies involved has its own reasons related to the developer or other agencies.&nbsp;<figure class="image"><img style="aspect-ratio:1600/1600;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//typical-reasons-for-delay-according-to-different-stakeholders_1750951303.jpeg" width="1600" height="1600"></figure>However, delays in most real estate projects follow an interesting storyline.The real cause of delays in real estate projectsThe lifecycle of a typical real estate project can be categorised into three key stages&nbsp;1. Pre-Construction: This stage involves the completion of all activities required before the commercial launch of the project, including:&nbsp;<ul><li>Business case approvals and land deal finalisation</li><li>Detailed design completion and issuance of goods for construction drawings to start construction</li><li>Project RERA approval and other necessary statutory approvals to start construction</li><li>Set-up of sales office/mock-up units for customer visits&nbsp;</li></ul>2. Core &amp; Shell: This stage involves the construction of buildings’ RCC frame and internal partition walls for the units. Typically, most developers engage a dedicated contractor to work on the Core and Shell.&nbsp;3. Finishing: This includes all work till the final handover of units to end customers. Plastering, waterproofing, flooring/tiling, electrical works, firefighting equipment installation, plumbing, painting, putting up doors &amp; windows, railings etc. are typical activities executed inside the residential units, in the corridors, common areas, shafts and utilities. Assessing delays in different stages of the project indicates that severe delays start to manifest in the finishing stage of the project.&nbsp;<figure class="image"><img style="aspect-ratio:16668/13746;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-4-01-01-01_1732344963.jpg" width="16668" height="13746"></figure>While Core &amp; Shell works are typically executed by a single specialized agency/contractor, what differentiates the finishing stage from the upstream stages are the following facts:&nbsp;<ul><li>Multiple specialised agencies: Finishing work needs intervention of multiple specialised agencies/sub-contractors in the limited space of a floor/apartment/unit</li><li>Inter-dependent activities: Activities to be performed by each specialised agency are dependent on clean front hand-over by another specialised agency or agencies. Moreover, technical dependencies are such that most finishing agencies have to visit a work-front multiple times. For e.g., the plastering contractor completes the plaster for maximum wall area in the first pass but re-visits the wall for final plastering after floor skirting and door/windows installation is completed</li><li>Volume-based contracts: For all specialised agencies, billing is based on the volume of work executed with a small percentage withheld as retention amount and linked to final completion and handover to the developer.&nbsp;</li></ul>Given the above realities of the real estate environment, agencies cherry-pick high billing activities in each work front in order to maximise billing to support its working capital requirements. Often, high effort and low billing value activities are missed out/delayed, leading to unclean front handover [8] to the next specialised agencies. Downstream agencies, despite unclean handovers, will start working on the front in order to utilise their resources and maximise their billing.&nbsp;However, given the unclean handovers, agencies face multiple interruptions in completing the fronts. And when there are interruptions, two things happen: a) it increases the overall lead time for completion of that front and creates a higher waiting time for the next agency to start work and b) the labour (of the agency facing interruption) may become idle. So, in order to utilise their resources fully, often the contractors are forced to start working on whatever is available wherever it is available (preferably with high billing), again with partial preparation. When this behaviour cascades across all processes involved, we end up having multiple contractors engaged in the same work area without having a clean handover six from one agency to the next. This chaotic way of functioning results, many times, in quality compromise.&nbsp;Inevitably, these quality problems come back to bite you in the form of snag lists or punch points. Now, contractors are reluctant to mobilise manpower for such activities. As mentioned earlier, they tend to prefer higher billing activities in new work fronts over handling the snag list, which may require high labour hours but yield lower billing. Therefore, very often, the company has to persuade the contractors by agreeing to higher hourly rates to get these snag list points closed. In this process, not only does the developer end up paying twice for the same work, but also suffers as the elapsed time for each work front closure elongates.&nbsp;<figure class="image"><img style="aspect-ratio:16668/19082;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-5-01-1-01-01_1732344935.jpg" width="16668" height="19082"></figure>The way outAs we have seen, when incomplete work fronts are handed over to the next stage, this leads to wastages in the form of rework, cost increases and leads to significant delays. Therefore, the only way to break out of this vicious loop is to make sure that clean handovers happen between two functions/contactors/agencies at all times. Since the pressure to maximise billing forces incomplete handovers, the only solution is for every agency to complete all their activities as per plan or earlier (i.e. in the shortest possible time). The question is, how do we ensure this?&nbsp;To resolve this conundrum, let’s examine, the key elements required to execute the project in the shortest possible time. The answer is quite intuitive. If the project has all the material needed, tools, clearances etc required to complete it (a full kit) and is resourced with adequate manpower in the right mix and quantity, work can progress without any interruptions or stoppages. No surprises here, right?&nbsp;Now, if we wait for the full kit to be formed for the entire project or a large phase of the project before starting it, the time to complete the full kit will be so significant that it will surely delay the project and be extremely wasteful in terms of resources. On the other hand, if we plan for full kitting of too small a phase of the project, this will lead to chaos as the work will progress faster than the time to arrange the full kit for that phase. Consequently, the pressure of time will again force the next phase to start without the completion of an earlier phase-back to the vicious loop.&nbsp;The answer lies somewhere in between. Based on project size and type, a part of the project, a ‘work bundle’ has to be identified in such a way that allows for adequate time to arrange the full kit and at the same time allows fast/clean handover to the next function. What next?&nbsp;The flow modelFor these work bundles to be completed quickly and in order to ensure clean handovers to happen between every stage a flow model needs to be used. What is a flow model? Think of a manufacturing shop, where there is input of raw materials and this input flows through the shopfloor, being processed at different workstations, and comes out as finished goods. All this happens in a rhythm. The flow model in real estate project management mimics this – a work bundle flows in, is processed by resources and a completed work bundle is passed on to the next set of resources. When all the work bundles flow through and are completed one after the other, the project gets completed.&nbsp;For this flow to work on a project site, it requires a set of execution rules to be defined. However, before doing that, some understanding is needed with respect to technical dependencies between agencies and the amount of natural interruption [9] happening in the course of the project. Functions [10] that are executed by various agencies can be classified into two types. One type, called the Primary function, has a high touch time for tasks and low natural interruptions. The second called the Secondary function, has low touch time and high natural interruptions. A combination of primary and secondary functions (and the resources responsible for completing these) is termed a Cluster. The flow line planned in any real estate project will consist of several such clusters laid out in a sequence, based on their technical dependencies.In order to ensure fast and clean completion, a work bundle should be taken up for working by a cluster only if the entry criteria, consisting of full kit, maximum resourcing, closure of earlier work bundle and any other pre-defined item, is met. Similarly, a work bundle is considered closed only if a pre-defined exit criteria is met. Further, the number of work bundles to be taken up depends on resourcing- i.e. the WIP of work fronts or work bundles is limited based on available capacity to prevent bad multi-tasking and consequent task time elongation. Once started, a cluster can go to the next work bundle only after completing one work bundle from the current WIP. This is called the One Out-One In rule in project management. In order to ensure that work does not start without full kits, a bank of full kits for subsequent work bundles must be made ready for a cluster to work on.&nbsp;Once these rules are in place, the flow model will work, in rhythm, and the project will progress according to this rhythm. The only thing that can upset this rhythm is the delay in resolving issues/problems that occur during execution. Generally, an issue remains unresolved only if it requires cross-functional intervention or escalation to someone with higher authority. If resolution does not happen quickly, the elapsed time to close work bundles will increase and that will in turn result in violations of all the flow model rules. Subsequently, the entire system may disintegrate into the earlier chaos.&nbsp;To make sure issues are resolved quickly and protect the flow of work bundles, a system of High Frequency Management (HFM) can be fixed for all stakeholders across or within functions, or hierarchies. If these HFM meetings are at a set pre-defined time and conducted at rhythmic intervals, it will allow stakeholders to be available to resolve issues quickly.&nbsp;When resources work on restricted work fronts, without being idle, with full-kit and when any issue that crops up during the execution of work is being resolved in an aggressively fast manner, the flow of work rapidly increases. With clean handovers, rework and snag lists also reduce significantly.&nbsp;The overall resultThe CEO of Blu Homes is a happy man these days. After implementing the flow model, lead times to handover possession to customers had dramatically come down by about 25% to 30%. Importantly, the company is now able to consistently adhere to budgeted due dates in its projects or finish earlier. This led to a dramatic improvement in IRR to the tune of 4%-6.5% in their projects.&nbsp;The table below illustrates how IRR improves significantly with just this reduction in lead time.<figure class="image"><img style="aspect-ratio:16668/16527;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-6-01-01_1732344916.jpg" width="16668" height="16527"></figure>As seen in the above example, most Blu Homes projects are of around 3-year (34-month) duration. As can be seen in the table, compared to a typical project execution of theirs from the past, projects in which the Flow Model of project management is employed show significant gains in time at major milestones. With the implementation of the flow line and a full kit process in central functions, to align material, drawing and approval requirements for the sites, projects could gain around three months compared to their earlier way of working while completing the core and shell activities. A further gain of another quarter or so could be made by implementing entry-exit criteria for every agency to ensure a clean handover during the pre-finishing and finishing activity. This was because the number of iterations required by an agency to complete a work bundle came down. Similar benefits of early finish by about a quarter were realised during the finishing phase as well.&nbsp;In addition to protecting the company's profitability, the Flow Model of project management also ensures that the working capital turns of the contractors and vendors improve a win-win-win scenario. However, what thrilled Mr. Mahindra Kumar most was that the new way of project execution yielded not only operational and financial benefits but also simultaneously de-stressed project execution for his whole team and helped build a company environment where work-life balance was good, and employee satisfaction was reflected in the significantly reduced attrition rate.&nbsp;

Using the Flow Model of Project management in residential real estate projects, companies can increase IRR from 17% -21%.

Steps to ensure excellent IRR in real estate projects

&nbsp;<h5>The dilemma of the CEO of a real estate major</h5>Mr. Mahindra Kumar, CEO of Blu Homes, a major residential real estate company in India, was facing a dilemma. He was under pressure to quickly improve the internal rate of return (IRR) of his projects. The problem was “how”.&nbsp;Even before the pandemic dealt a painful blow, the pressure on the real estate sector was evident to all [1]. Post-2013, sales of Blu Homes had stalled, unsold inventory had piled up, and the Internal Rate of Return (IRR) from the projects had dropped from 18%-21% realised between 2007-11 to 13%-17%; moreover, the debt burden had more than trebled over the same period.&nbsp;The good news, however, was that his company had emerged whole from the COVID phase. Much of the inventory could be sold even during this time because of government subsidy support [2]. Post-COVID the company was now achieving YoY sales growth of 68%. Over the past two years Tier 2 and Tier 3 cities had emerged as hot spots for them, and they were setting unprecedented sales benchmarks.&nbsp;Despite the global economic slowdown, this positive momentum was expected to continue, and the sector is projected to grow to one trillion US dollars by 2030 (see figure below [3]).&nbsp;<figure class="image"><img style="aspect-ratio:16668/11858;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-1-01_1732343241.jpg" width="16668" height="11858"></figure>What more, there was a prevailing demand-supply gap in all segments (see figure below [4]).&nbsp;<figure class="image"><img style="aspect-ratio:16668/12757;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-1_1732343548.jpg" width="16668" height="12757"></figure>Naturally, the board of Blu Homes saw this as a clear opportunity to mop up this demand, recoup the business, put its profits on a growth trajectory and offer healthier returns. The threat was always there that if the company continued to only make IRR to the tune of 13-17% in its projects, investors might pull out. So, the pressure was now on Mr. Mahindra Kumar to ensure a significant jump in IRR. However, he was not sure how. For improving IRR, it was not enough to improve sales; in addition, Blu Homes must ensure that, while delivering each project, they&nbsp;1. Reduce costs and improve margins&nbsp;2. Improve cash flow by faster billing&nbsp;The key to both of these is primarily the timely completion of projects. If projects are finished on time as planned, customers can be billed faster, and un-budgeted expenses due to project elongation can be avoided.&nbsp;The irony was that Blu Homes has ALWAYS delivered projects on or before the promised deadlines (protected by the Real Estate Regulatory Authority - RERA). However, the company rarely met the targeted IRR in these projects, even during the ‘good times’. And this was not only true for Blu Homes - it is an industry-wide phenomenon!&nbsp;To understand why this happens, one needs to understand how companies in this unique environment typically function.&nbsp;The typical way of project management in a real estate projectProjects in the Real Estate industry in India start off with three due/completion dates! Strange, but true. With the government bringing in RERA laws that impose stringent penalties on developers for delays in finishing projects, the industry has come up with RERA due dates, which are significantly buffered to avoid being penalised [5]. Another due date is the internally budgeted due date, which, if met, meets the IRR targets set by the developer. The third due date, which is ‘informally’ promised to end customers, is somewhere in between these two.&nbsp;So, why does the industry use these 3 due dates? The reason is that real estate is an industry plagued with project delays and unfulfilled promises. Recent research has indicated that, despite conservative and buffered dates, as many as 500,000 Homes worth Rs. 4.48 lakh crores are stuck in just seven micro markets of India [6].&nbsp;<figure class="image"><img style="aspect-ratio:16668/18669;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-2-01-01_1732343964.jpg" width="16668" height="18669"></figure>With such delays being the norm rather than the exception, developers know that they have to buffer any external commitment in order to maintain their reputation and gain or maintain market share.Why should there be delays, one may ask?If you ask any developer about delays, you will be met with a laundry list of reasons, most of them pointing to some external agency and hence, unavoidable. Interestingly, each of the agencies involved has its own reasons related to the developer or other agencies.&nbsp;<figure class="image"><img style="aspect-ratio:1600/1600;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//typical-reasons-for-delay-according-to-different-stakeholders_1750951303.jpeg" width="1600" height="1600"></figure>However, delays in most real estate projects follow an interesting storyline.The real cause of delays in real estate projectsThe lifecycle of a typical real estate project can be categorised into three key stages&nbsp;1. Pre-Construction: This stage involves the completion of all activities required before the commercial launch of the project, including:&nbsp;<ul><li>Business case approvals and land deal finalisation</li><li>Detailed design completion and issuance of goods for construction drawings to start construction</li><li>Project RERA approval and other necessary statutory approvals to start construction</li><li>Set-up of sales office/mock-up units for customer visits&nbsp;</li></ul>2. Core &amp; Shell: This stage involves the construction of buildings’ RCC frame and internal partition walls for the units. Typically, most developers engage a dedicated contractor to work on the Core and Shell.&nbsp;3. Finishing: This includes all work till the final handover of units to end customers. Plastering, waterproofing, flooring/tiling, electrical works, firefighting equipment installation, plumbing, painting, putting up doors &amp; windows, railings etc. are typical activities executed inside the residential units, in the corridors, common areas, shafts and utilities. Assessing delays in different stages of the project indicates that severe delays start to manifest in the finishing stage of the project.&nbsp;<figure class="image"><img style="aspect-ratio:16668/13746;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-4-01-01-01_1732344963.jpg" width="16668" height="13746"></figure>While Core &amp; Shell works are typically executed by a single specialized agency/contractor, what differentiates the finishing stage from the upstream stages are the following facts:&nbsp;<ul><li>Multiple specialised agencies: Finishing work needs intervention of multiple specialised agencies/sub-contractors in the limited space of a floor/apartment/unit</li><li>Inter-dependent activities: Activities to be performed by each specialised agency are dependent on clean front hand-over by another specialised agency or agencies. Moreover, technical dependencies are such that most finishing agencies have to visit a work-front multiple times. For e.g., the plastering contractor completes the plaster for maximum wall area in the first pass but re-visits the wall for final plastering after floor skirting and door/windows installation is completed</li><li>Volume-based contracts: For all specialised agencies, billing is based on the volume of work executed with a small percentage withheld as retention amount and linked to final completion and handover to the developer.&nbsp;</li></ul>Given the above realities of the real estate environment, agencies cherry-pick high billing activities in each work front in order to maximise billing to support its working capital requirements. Often, high effort and low billing value activities are missed out/delayed, leading to unclean front handover [8] to the next specialised agencies. Downstream agencies, despite unclean handovers, will start working on the front in order to utilise their resources and maximise their billing.&nbsp;However, given the unclean handovers, agencies face multiple interruptions in completing the fronts. And when there are interruptions, two things happen: a) it increases the overall lead time for completion of that front and creates a higher waiting time for the next agency to start work and b) the labour (of the agency facing interruption) may become idle. So, in order to utilise their resources fully, often the contractors are forced to start working on whatever is available wherever it is available (preferably with high billing), again with partial preparation. When this behaviour cascades across all processes involved, we end up having multiple contractors engaged in the same work area without having a clean handover six from one agency to the next. This chaotic way of functioning results, many times, in quality compromise.&nbsp;Inevitably, these quality problems come back to bite you in the form of snag lists or punch points. Now, contractors are reluctant to mobilise manpower for such activities. As mentioned earlier, they tend to prefer higher billing activities in new work fronts over handling the snag list, which may require high labour hours but yield lower billing. Therefore, very often, the company has to persuade the contractors by agreeing to higher hourly rates to get these snag list points closed. In this process, not only does the developer end up paying twice for the same work, but also suffers as the elapsed time for each work front closure elongates.&nbsp;<figure class="image"><img style="aspect-ratio:16668/19082;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-5-01-1-01-01_1732344935.jpg" width="16668" height="19082"></figure>The way outAs we have seen, when incomplete work fronts are handed over to the next stage, this leads to wastages in the form of rework, cost increases and leads to significant delays. Therefore, the only way to break out of this vicious loop is to make sure that clean handovers happen between two functions/contactors/agencies at all times. Since the pressure to maximise billing forces incomplete handovers, the only solution is for every agency to complete all their activities as per plan or earlier (i.e. in the shortest possible time). The question is, how do we ensure this?&nbsp;To resolve this conundrum, let’s examine, the key elements required to execute the project in the shortest possible time. The answer is quite intuitive. If the project has all the material needed, tools, clearances etc required to complete it (a full kit) and is resourced with adequate manpower in the right mix and quantity, work can progress without any interruptions or stoppages. No surprises here, right?&nbsp;Now, if we wait for the full kit to be formed for the entire project or a large phase of the project before starting it, the time to complete the full kit will be so significant that it will surely delay the project and be extremely wasteful in terms of resources. On the other hand, if we plan for full kitting of too small a phase of the project, this will lead to chaos as the work will progress faster than the time to arrange the full kit for that phase. Consequently, the pressure of time will again force the next phase to start without the completion of an earlier phase-back to the vicious loop.&nbsp;The answer lies somewhere in between. Based on project size and type, a part of the project, a ‘work bundle’ has to be identified in such a way that allows for adequate time to arrange the full kit and at the same time allows fast/clean handover to the next function. What next?&nbsp;The flow modelFor these work bundles to be completed quickly and in order to ensure clean handovers to happen between every stage a flow model needs to be used. What is a flow model? Think of a manufacturing shop, where there is input of raw materials and this input flows through the shopfloor, being processed at different workstations, and comes out as finished goods. All this happens in a rhythm. The flow model in real estate project management mimics this – a work bundle flows in, is processed by resources and a completed work bundle is passed on to the next set of resources. When all the work bundles flow through and are completed one after the other, the project gets completed.&nbsp;For this flow to work on a project site, it requires a set of execution rules to be defined. However, before doing that, some understanding is needed with respect to technical dependencies between agencies and the amount of natural interruption [9] happening in the course of the project. Functions [10] that are executed by various agencies can be classified into two types. One type, called the Primary function, has a high touch time for tasks and low natural interruptions. The second called the Secondary function, has low touch time and high natural interruptions. A combination of primary and secondary functions (and the resources responsible for completing these) is termed a Cluster. The flow line planned in any real estate project will consist of several such clusters laid out in a sequence, based on their technical dependencies.In order to ensure fast and clean completion, a work bundle should be taken up for working by a cluster only if the entry criteria, consisting of full kit, maximum resourcing, closure of earlier work bundle and any other pre-defined item, is met. Similarly, a work bundle is considered closed only if a pre-defined exit criteria is met. Further, the number of work bundles to be taken up depends on resourcing- i.e. the WIP of work fronts or work bundles is limited based on available capacity to prevent bad multi-tasking and consequent task time elongation. Once started, a cluster can go to the next work bundle only after completing one work bundle from the current WIP. This is called the One Out-One In rule in project management. In order to ensure that work does not start without full kits, a bank of full kits for subsequent work bundles must be made ready for a cluster to work on.&nbsp;Once these rules are in place, the flow model will work, in rhythm, and the project will progress according to this rhythm. The only thing that can upset this rhythm is the delay in resolving issues/problems that occur during execution. Generally, an issue remains unresolved only if it requires cross-functional intervention or escalation to someone with higher authority. If resolution does not happen quickly, the elapsed time to close work bundles will increase and that will in turn result in violations of all the flow model rules. Subsequently, the entire system may disintegrate into the earlier chaos.&nbsp;To make sure issues are resolved quickly and protect the flow of work bundles, a system of High Frequency Management (HFM) can be fixed for all stakeholders across or within functions, or hierarchies. If these HFM meetings are at a set pre-defined time and conducted at rhythmic intervals, it will allow stakeholders to be available to resolve issues quickly.&nbsp;When resources work on restricted work fronts, without being idle, with full-kit and when any issue that crops up during the execution of work is being resolved in an aggressively fast manner, the flow of work rapidly increases. With clean handovers, rework and snag lists also reduce significantly.&nbsp;The overall resultThe CEO of Blu Homes is a happy man these days. After implementing the flow model, lead times to handover possession to customers had dramatically come down by about 25% to 30%. Importantly, the company is now able to consistently adhere to budgeted due dates in its projects or finish earlier. This led to a dramatic improvement in IRR to the tune of 4%-6.5% in their projects.&nbsp;The table below illustrates how IRR improves significantly with just this reduction in lead time.<figure class="image"><img style="aspect-ratio:16668/16527;" src="https://backend.vectorconsulting.in/storage/editor_uploads//ec-article-1-img-6-01-01_1732344916.jpg" width="16668" height="16527"></figure>As seen in the above example, most Blu Homes projects are of around 3-year (34-month) duration. As can be seen in the table, compared to a typical project execution of theirs from the past, projects in which the Flow Model of project management is employed show significant gains in time at major milestones. With the implementation of the flow line and a full kit process in central functions, to align material, drawing and approval requirements for the sites, projects could gain around three months compared to their earlier way of working while completing the core and shell activities. A further gain of another quarter or so could be made by implementing entry-exit criteria for every agency to ensure a clean handover during the pre-finishing and finishing activity. This was because the number of iterations required by an agency to complete a work bundle came down. Similar benefits of early finish by about a quarter were realised during the finishing phase as well.&nbsp;In addition to protecting the company's profitability, the Flow Model of project management also ensures that the working capital turns of the contractors and vendors improve a win-win-win scenario. However, what thrilled Mr. Mahindra Kumar most was that the new way of project execution yielded not only operational and financial benefits but also simultaneously de-stressed project execution for his whole team and helped build a company environment where work-life balance was good, and employee satisfaction was reflected in the significantly reduced attrition rate.&nbsp;&nbsp;&nbsp;&nbsp;

In recent years, India’s fashion retail landscape has undergone a significant transformation. The Indian fashion industry, with a robust CAGR of 10.2% [1], is fast outpacing many other retail sectors, which are growing at a CAGR of 8%-9% [2]. This growth is driven largely driven by tier 2 and tier 3 cities, which now contribute to as much as 65% of the revenue of leading apparel e-commerce platforms [3]. The potential of these towns is immense, and their rapid urbanisation, rising disposable incomes, and a growing appetite for aspirational lifestyles are creating exciting growth opportunities for fashion brands.<h5>&nbsp;</h5><h5>The evolution of consumer preferences</h5>Today’s customers, including those in tier 2 and 3 towns, are not only more brand-aware but also more style-conscious, largely due to the influence of social media. Platforms like Instagram, YouTube, and Pinterest have made global fashion trends more accessible, inspiring an array of local interpretations and preferences. This shift in consumer behaviour necessitates that brands expand their product offerings to cater to diverse tastes—from athleisure and western wear to all-day fusion and ethnic fusion attire that blends Indian styles with modern aesthetics.&nbsp;This proliferation of choice extends to fabric and materials as well, with options like stretch fabrics, Lycra, and performance materials that enhance comfort and versatility. The days when fashion was limited to broad categories of formal, casual, and sportswear are long gone. Today’s fashion landscape is nuanced, catering to lifestyles that blend work, play, and relaxation within a single wardrobe.<h5>&nbsp;</h5><h5>Offline retail expansion</h5>While e-commerce has played a pivotal role in raising brand awareness, offline stores are crucial for offering the in-person shopping experiences that consumers in these areas are increasingly eager to explore. For example, stores allow customers to see, feel, and try on clothing—a critical factor for a consumer base that still values the tangible aspects of shopping over digital convenience. In response to this demand, brands are expanding their offline footprint in tier 2 and 3 towns.&nbsp;<h5>The retail conundrum</h5>While expansion of stores into tier 2 and 3 towns has opened up exciting opportunities, it has also increased complexities for fashion brands.<ul style="list-style-type:square;"><li>Extensive assortment planning for each store</li></ul>One of the core challenges lies in managing the assortment planning for each new store location. Retail planners must decide the specific product attributes (or "assortment") for each store to meet local demand and ensure the right stock is available throughout the season. This requires extensive pre-season planning to fill the store's display planograms with the right styles, sizes, and colours for the upcoming season.&nbsp;As brands increase the number of stores and expand style options, the number of unique store-style combinations multiplies. Each assortment is planned in smaller, more focused quantities to align with local demand, making it increasingly difficult to predict which items will sell at full price and which will require markdowns. The accuracy of this planning is critical: without precise assortment alignment, excess inventory leads to markdowns, while stockouts result in missed sales opportunities.&nbsp;<ul style="list-style-type:square;"><li>Struggle with real-time adjustments in store deployment</li></ul>Throughout the season, actual sales often deviate from forecasts, necessitating real-time adjustments. This involves shifting stock across stores or deploying new styles to locations showing higher demand. Planners must adjust multiple store-assortment combinations based on ongoing sales dynamics, making it a cumbersome and manpower-intensive process. However, as the number of stores and assortment groups grows, managing these changes manually, especially using spreadsheets, becomes almost unmanageable. The need for agile, real-time adjustments is more pressing than ever.&nbsp;<h5>Limitations of manual planning</h5>Given the limitations of traditional spreadsheet-based tools, brands have had to adopt certain compromises:<ol><li>Aggregate assortment planning: Instead of planning each store's assortment individually, brands now often group stores with similar sales patterns or by regional clusters. This aggregation allows for some level of customisation without the extensive manual effort needed for a store-level breakdown. However, this approach lacks the granularity needed for optimal results, leading to mismatched assortments and reduced full-price sell-throughs.&nbsp;</li><li>Selective in-season management: Moreover, due to the high manual workload, planners focus primarily on stores contributing the majority of sales, often neglecting smaller locations. This selective in-season adjustment may meet immediate goals but misses out on fine-tuning across the full network of stores. This is cumbersome to manage.&nbsp;</li><li>Delayed response to market changes: The reliance on spreadsheet-based planning also makes the entire system dependent on available manpower and expertise. When planners are preoccupied or short-staffed, decision-making processes slow down, updates to assortment planning are delayed and the frequency of real-time adjustments decreases, making it harder for brands to adapt to changing sales trends.</li></ol><h5>&nbsp;</h5><h5>The impact</h5><ul style="list-style-type:square;"><li><h6>Missing the mark on local preferences</h6></li></ul>As brands expand into tier 2 and tier 3 towns the shift towards aggregate planning has significant repercussions. By grouping stores into regional clusters rather than focusing on each store's unique local preferences, brands risk ignoring specific tastes, seasonal demand, and size preferences. This broad-brush approach often leads to assortments that fail to resonate with the local market, and size set breakages, resulting in lower conversion rates. Even with significant foot traffic, stores struggle to convert these visits into purchases, leading to decreased sell-through rates. It's crucial for brands to understand and cater to local preferences to ensure their assortments are well-received.&nbsp;<ul style="list-style-type:square;"><li><h6>Escalating discount culture and brand erosion</h6></li></ul>As unsold inventory accumulates, brands are compelled to implement steep discounts to clear stock, which contributes to a damaging discount culture especially in the "tail" stores (those with lower-than-average sales). These stores, filled with off-season, heavily discounted stock, become associated more with clearance sales than with fresh fashion trends. This practice has a double-edged impact on brand value: not only does it train customers to expect discounts, but it also dilutes the brand's image as a provider of quality and timely fashion.&nbsp;<ul style="list-style-type:square;"><li><h6>Once a tail, always a tail</h6></li></ul>In a bid to offload past-season inventory, brands resort to recycling unsold stock and sending it to low-performing stores. These tail stores, now repositories of outdated styles, struggle to attract local consumers who seek current fashion trends. Instead of boosting sales, this approach perpetuates the discount culture, eroding both brand perception and profitability. The continuous recycling of stale inventory in these locations deepens the revenue slump, digging the financial grave for these outlets even deeper.&nbsp;<ul style="list-style-type:square;"><li><h6>Increased store closures</h6></li></ul>This aggregate planning approach, combined with the impacts of discounting and recycled inventory, ultimately makes many new stores financially unsustainable. Low revenue generation forces brands to shutter locations at a higher rate than ever before, especially in emerging markets. Comparing the gross additions to net additions in store counts for leading retail apparel chains illustrates this reality: a higher frequency of closures underscores how crucial localised assortment planning has become.&nbsp;<h5>Breaking the conundrum: The role of business intelligence</h5>To address these complex challenges, brands need an integrated Business Intelligence (BI) tool that enables end-to-end visibility and control over inventory planning, allocation, and replenishment. Such a system can provide real-time insights and flexible planning options, allowing brands to react to market dynamics and consumer trends promptly. Here's how a BI tool can revolutionize both pre-season and in-season operations:<h6>&nbsp;</h6><h6>Pre-season planning: Precision in assortment and merchandise</h6><ol><li>Assortment planning: A robust BI tool can allocate displays for each assortment group tailored to each store, considering recent local trends. This dynamic approach not only aids in season buy planning but also adapts allocations if significant deviations in sales trends arise mid-season. For brands, this level of granularity ensures that each store has the right mix to maximise customer satisfaction and conversion.&nbsp;</li><li>Merchandise planning: With advanced predictive analytics, the tool can calculate a season’s buy plan, factoring in depth and width requirements as well as size ratios. By predicting optimal quantities per style and size based on past sales and market forecasts, brands can make data-driven decisions that minimise overstock and unsold inventory.&nbsp;</li></ol><h6>In-season operations: Adaptability in inventory management</h6><ol><li>Listing engine: As new styles launch, using a listing engine function can help fill initial store displays while holding back additional stock in a centralised warehouse for rapid replenishment. This structured approach prevents overloading stores with inventory, allowing them to adapt to evolving customer demand.&nbsp;</li><li>Replenishment: Rapid replenishment features can restock stores with fast-selling items, keeping popular items available throughout the season. This feature minimises lost sales opportunities and strengthens brand reliability in the eyes of consumers.&nbsp;</li><li>Inter-store transfers: A BI tool that identifies low-selling stores and uses their stock to replenish popular items at high-performing locations optimises stock utilisation. This strategic redistribution improves sell-through rates and ensures inventory remains actively engaged.&nbsp;</li><li>Dud identification: With AI-powered analytics, the system can pinpoint slow-moving styles early in the season, allowing brands to take timely corrective actions to increase sell-through rates or consider other disposition strategies.</li></ol>&nbsp;<h5>Workflow integration: Streamlining decisions with ERP and POS systems</h5>A BI tool is only as effective as its integration capabilities. For maximum impact, it must manage the workflow after decisions are made, linking seamlessly with the company’s ERP and POS systems. This integration automates inventory adjustments, stock transfers, and other critical tasks, drastically reducing the time and manpower needed for execution.<h5>&nbsp;</h5><h5>Vector's comprehensive BI solution</h5>Vector, leveraging its extensive experience in fashion retail and AI-powered analytics, has developed a software solution that addresses these needs. Vector Digital Labs has tailored this tool to connect with ERP systems and trigger workflows, freeing planners and buyers from manual processes and enabling faster, more accurate decision-making. By adopting such advanced BI tools, fashion retailers can effectively navigate the inventory challenges inherent to the industry, preserving profitability and enhancing their brand reputation in the process.<h5>&nbsp;</h5><h5>Conclusion</h5>In the fast-evolving landscape of fashion retail, where consumer expectations and market trends can shift at a moment's notice, having the right tools and strategies in place is essential. The challenges of expanding into tier 2 and 3 towns, combined with the complexities of precise inventory planning and real-time adjustments, have made traditional methods inadequate. Brands that rely on aggregated planning and manual processes risk eroding their brand value, losing customers, and facing an unsustainable cycle of markdowns and closures.&nbsp;The integration of a robust Business Intelligence (BI) system, as demonstrated by Vector’s solution, offers a way forward. By enabling accurate, localised assortment planning, timely in-season adjustments, and seamless ERP and POS integration, brands can meet consumer demands with precision, improve sell-through rates, and maintain agility across their store networks. This data-driven approach doesn’t just streamline operations; it builds the foundation for sustainable growth in a highly competitive industry.&nbsp;Ultimately, in the world of fashion retail, where trends can change overnight, an advanced BI tool might just be the “fashion-forward” approach that helps brands stay ahead of the curve.

<h5>Effectively expanding the horizons of fashion retail: Challenges and solutions</h5>

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India's fashion retail faces evolving consumer preferences, inventory challenges, and offline expansion, requiring BI-driven solutions for sustainable growth.&nbsp;&nbsp;Problem: India’s fashion retail faces challenges in managing inventory planning and assortment alignment as brands expand into tier 2 and 3 towns. Traditional manual processes and aggregated planning lead to mismatched assortments, unsold inventory, markdowns, and brand erosion.&nbsp;Solution: An integrated Business Intelligence (BI) tool ensures precise pre-season planning, real-time adjustments, inter-store stock transfers, and ERP/POS integration.&nbsp;Benefits: Brands can optimise inventory, align with local preferences, minimise markdowns, boost sell-through rates, enhance customer satisfaction, and ensure sustainable profitability.

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Discover how India's fashion retail is evolving with rising tier 2 and 3 markets, changing consumer preferences, offline store expansion, inventory challenges, and the role of Business Intelligence in driving growth.

Effectively expanding the horizons of fashion retail: Challenges and solutions

In recent years, India’s fashion retail landscape has undergone a significant transformation. The Indian fashion industry, with a robust CAGR of 10.2% [1], is fast outpacing many other retail sectors, which are growing at a CAGR of 8%-9% [2]. This growth is driven largely driven by tier 2 and tier 3 cities, which now contribute to as much as 65% of the revenue of leading apparel e-commerce platforms [3]. The potential of these towns is immense, and their rapid urbanisation, rising disposable incomes, and a growing appetite for aspirational lifestyles are creating exciting growth opportunities for fashion brands.<h5>&nbsp;</h5><h5>The evolution of consumer preferences</h5>Today’s customers, including those in tier 2 and 3 towns, are not only more brand-aware but also more style-conscious, largely due to the influence of social media. Platforms like Instagram, YouTube, and Pinterest have made global fashion trends more accessible, inspiring an array of local interpretations and preferences. This shift in consumer behaviour necessitates that brands expand their product offerings to cater to diverse tastes—from athleisure and western wear to all-day fusion and ethnic fusion attire that blends Indian styles with modern aesthetics.&nbsp;This proliferation of choice extends to fabric and materials as well, with options like stretch fabrics, Lycra, and performance materials that enhance comfort and versatility. The days when fashion was limited to broad categories of formal, casual, and sportswear are long gone. Today’s fashion landscape is nuanced, catering to lifestyles that blend work, play, and relaxation within a single wardrobe.<h5>&nbsp;</h5><h5>Offline retail expansion</h5>While e-commerce has played a pivotal role in raising brand awareness, offline stores are crucial for offering the in-person shopping experiences that consumers in these areas are increasingly eager to explore. For example, stores allow customers to see, feel, and try on clothing—a critical factor for a consumer base that still values the tangible aspects of shopping over digital convenience. In response to this demand, brands are expanding their offline footprint in tier 2 and 3 towns.&nbsp;<h5>The retail conundrum</h5>While expansion of stores into tier 2 and 3 towns has opened up exciting opportunities, it has also increased complexities for fashion brands.<ul style="list-style-type:square;"><li>Extensive assortment planning for each store</li></ul>One of the core challenges lies in managing the assortment planning for each new store location. Retail planners must decide the specific product attributes (or "assortment") for each store to meet local demand and ensure the right stock is available throughout the season. This requires extensive pre-season planning to fill the store's display planograms with the right styles, sizes, and colours for the upcoming season.&nbsp;As brands increase the number of stores and expand style options, the number of unique store-style combinations multiplies. Each assortment is planned in smaller, more focused quantities to align with local demand, making it increasingly difficult to predict which items will sell at full price and which will require markdowns. The accuracy of this planning is critical: without precise assortment alignment, excess inventory leads to markdowns, while stockouts result in missed sales opportunities.&nbsp;<ul style="list-style-type:square;"><li>Struggle with real-time adjustments in store deployment</li></ul>Throughout the season, actual sales often deviate from forecasts, necessitating real-time adjustments. This involves shifting stock across stores or deploying new styles to locations showing higher demand. Planners must adjust multiple store-assortment combinations based on ongoing sales dynamics, making it a cumbersome and manpower-intensive process. However, as the number of stores and assortment groups grows, managing these changes manually, especially using spreadsheets, becomes almost unmanageable. The need for agile, real-time adjustments is more pressing than ever.&nbsp;<h5>Limitations of manual planning</h5>Given the limitations of traditional spreadsheet-based tools, brands have had to adopt certain compromises:<ol><li>Aggregate assortment planning: Instead of planning each store's assortment individually, brands now often group stores with similar sales patterns or by regional clusters. This aggregation allows for some level of customisation without the extensive manual effort needed for a store-level breakdown. However, this approach lacks the granularity needed for optimal results, leading to mismatched assortments and reduced full-price sell-throughs.&nbsp;</li><li>Selective in-season management: Moreover, due to the high manual workload, planners focus primarily on stores contributing the majority of sales, often neglecting smaller locations. This selective in-season adjustment may meet immediate goals but misses out on fine-tuning across the full network of stores. This is cumbersome to manage.&nbsp;</li><li>Delayed response to market changes: The reliance on spreadsheet-based planning also makes the entire system dependent on available manpower and expertise. When planners are preoccupied or short-staffed, decision-making processes slow down, updates to assortment planning are delayed and the frequency of real-time adjustments decreases, making it harder for brands to adapt to changing sales trends.</li></ol><h5>&nbsp;</h5><h5>The impact</h5><ul style="list-style-type:square;"><li><h6>Missing the mark on local preferences</h6></li></ul>As brands expand into tier 2 and tier 3 towns the shift towards aggregate planning has significant repercussions. By grouping stores into regional clusters rather than focusing on each store's unique local preferences, brands risk ignoring specific tastes, seasonal demand, and size preferences. This broad-brush approach often leads to assortments that fail to resonate with the local market, and size set breakages, resulting in lower conversion rates. Even with significant foot traffic, stores struggle to convert these visits into purchases, leading to decreased sell-through rates. It's crucial for brands to understand and cater to local preferences to ensure their assortments are well-received.&nbsp;<ul style="list-style-type:square;"><li><h6>Escalating discount culture and brand erosion</h6></li></ul>As unsold inventory accumulates, brands are compelled to implement steep discounts to clear stock, which contributes to a damaging discount culture especially in the "tail" stores (those with lower-than-average sales). These stores, filled with off-season, heavily discounted stock, become associated more with clearance sales than with fresh fashion trends. This practice has a double-edged impact on brand value: not only does it train customers to expect discounts, but it also dilutes the brand's image as a provider of quality and timely fashion.&nbsp;<ul style="list-style-type:square;"><li><h6>Once a tail, always a tail</h6></li></ul>In a bid to offload past-season inventory, brands resort to recycling unsold stock and sending it to low-performing stores. These tail stores, now repositories of outdated styles, struggle to attract local consumers who seek current fashion trends. Instead of boosting sales, this approach perpetuates the discount culture, eroding both brand perception and profitability. The continuous recycling of stale inventory in these locations deepens the revenue slump, digging the financial grave for these outlets even deeper.&nbsp;<ul style="list-style-type:square;"><li><h6>Increased store closures</h6></li></ul>This aggregate planning approach, combined with the impacts of discounting and recycled inventory, ultimately makes many new stores financially unsustainable. Low revenue generation forces brands to shutter locations at a higher rate than ever before, especially in emerging markets. Comparing the gross additions to net additions in store counts for leading retail apparel chains illustrates this reality: a higher frequency of closures underscores how crucial localised assortment planning has become.&nbsp;<h5>Breaking the conundrum: The role of business intelligence</h5>To address these complex challenges, brands need an integrated Business Intelligence (BI) tool that enables end-to-end visibility and control over inventory planning, allocation, and replenishment. Such a system can provide real-time insights and flexible planning options, allowing brands to react to market dynamics and consumer trends promptly. Here's how a BI tool can revolutionize both pre-season and in-season operations:<h6>&nbsp;</h6><h6>Pre-season planning: Precision in assortment and merchandise</h6><ol><li>Assortment planning: A robust BI tool can allocate displays for each assortment group tailored to each store, considering recent local trends. This dynamic approach not only aids in season buy planning but also adapts allocations if significant deviations in sales trends arise mid-season. For brands, this level of granularity ensures that each store has the right mix to maximise customer satisfaction and conversion.&nbsp;</li><li>Merchandise planning: With advanced predictive analytics, the tool can calculate a season’s buy plan, factoring in depth and width requirements as well as size ratios. By predicting optimal quantities per style and size based on past sales and market forecasts, brands can make data-driven decisions that minimise overstock and unsold inventory.&nbsp;</li></ol><h6>In-season operations: Adaptability in inventory management</h6><ol><li>Listing engine: As new styles launch, using a listing engine function can help fill initial store displays while holding back additional stock in a centralised warehouse for rapid replenishment. This structured approach prevents overloading stores with inventory, allowing them to adapt to evolving customer demand.&nbsp;</li><li>Replenishment: Rapid replenishment features can restock stores with fast-selling items, keeping popular items available throughout the season. This feature minimises lost sales opportunities and strengthens brand reliability in the eyes of consumers.&nbsp;</li><li>Inter-store transfers: A BI tool that identifies low-selling stores and uses their stock to replenish popular items at high-performing locations optimises stock utilisation. This strategic redistribution improves sell-through rates and ensures inventory remains actively engaged.&nbsp;</li><li>Dud identification: With AI-powered analytics, the system can pinpoint slow-moving styles early in the season, allowing brands to take timely corrective actions to increase sell-through rates or consider other disposition strategies.</li></ol>&nbsp;<h5>Workflow integration: Streamlining decisions with ERP and POS systems</h5>A BI tool is only as effective as its integration capabilities. For maximum impact, it must manage the workflow after decisions are made, linking seamlessly with the company’s ERP and POS systems. This integration automates inventory adjustments, stock transfers, and other critical tasks, drastically reducing the time and manpower needed for execution.<h5>&nbsp;</h5><h5>Vector's comprehensive BI solution</h5>Vector, leveraging its extensive experience in fashion retail and AI-powered analytics, has developed a software solution that addresses these needs. Vector Digital Labs has tailored this tool to connect with ERP systems and trigger workflows, freeing planners and buyers from manual processes and enabling faster, more accurate decision-making. By adopting such advanced BI tools, fashion retailers can effectively navigate the inventory challenges inherent to the industry, preserving profitability and enhancing their brand reputation in the process.<h5>&nbsp;</h5><h5>Conclusion</h5>In the fast-evolving landscape of fashion retail, where consumer expectations and market trends can shift at a moment's notice, having the right tools and strategies in place is essential. The challenges of expanding into tier 2 and 3 towns, combined with the complexities of precise inventory planning and real-time adjustments, have made traditional methods inadequate. Brands that rely on aggregated planning and manual processes risk eroding their brand value, losing customers, and facing an unsustainable cycle of markdowns and closures.&nbsp;The integration of a robust Business Intelligence (BI) system, as demonstrated by Vector’s solution, offers a way forward. By enabling accurate, localised assortment planning, timely in-season adjustments, and seamless ERP and POS integration, brands can meet consumer demands with precision, improve sell-through rates, and maintain agility across their store networks. This data-driven approach doesn’t just streamline operations; it builds the foundation for sustainable growth in a highly competitive industry.&nbsp;Ultimately, in the world of fashion retail, where trends can change overnight, an advanced BI tool might just be the “fashion-forward” approach that helps brands stay ahead of the curve.

Uncover challenges and solutions for effectively expanding the horizons of fashion retail. Insights by Vector Consulting Group. Read the full article here.

Insights on managing inventory in fashion retail | Vector Consulting Group

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