The global economy has faced significant challenges in recent years, with the residual effects of the COVID-19 pandemic, political unrest, and related supply chain issues all continuing to impact organizations, ultimately contributing to global inflation figures not seen since the early 2000s.
With the threat of recession still looming, direct-to-consumer (D2C) manufacturers may feel apprehensive with regards to scaling their operations. Times of recession are, of course, often characterized by conservative spending habits and changes in buyer behavior, leading many business owners to consider adjusting proposed operations in order to reduce excess spending.
However, there is reason for D2C manufacturers to feel optimistic about the future. Figures suggest spending during key holiday periods has remained at a sustainable level in recent years, with supporting data indicating general consumer spending may be trending upwards.
This short article will explore these findings in a little more detail in order to gauge the impact of recession on the manufacturing industry, as well as uncover a variety of methods and actionable processes that teams can follow to help organizations adapt to an uncertain economic climate.
Key Trends in Manufacturing: Seasonal Spending
Looking at data collected from D2C manufacturers during the 2021 and 2022 holiday periods, manufacturing software business Katana has reported an increase in daily sales for seasonal businesses, specifically over the Black Friday and Cyber Monday sales period. According to information published by inventory management specialists Katata, daily sales volumes during this time saw an average increase of 44% when compared to regular Q4 levels, suggesting consumers may not be curtailing seasonal spending.
However, figures pertaining to the winter holiday period as a whole paint a different picture. In fact, a 56% decrease in average daily sales order volume can be observed when compared to Q4 levels in 2022. This information indicates that, whilst many consumers may exhibit a desire to increase seasonal spending, much of this activity appears to be limited to advertised sales.
So, what does this mean for D2C manufacturers? Whilst consumer spending habits do indicate a sense of apprehension amongst the public, profits can be made with calculated planning. For teams to capitalize on seasonal spending, inventory management and resource allocation must be considered far in advance of peak spending periods. By procuring stock in preparation for high sales activity, and ensuring levels are consistent with demand, revenue can be maintained.
Challenges for D2C Manufacturers
The primary challenge for D2C manufacturers attempting to navigate current market fluctuations involves finding a suitable balance between reaching consumers during peak spending periods, and avoiding the pitfalls of competing with low-ball offers for similar products. In short, business leaders must be able to forecast demand and understand the impact of pricing on a wider scale.
Manufacturers must develop plans to address surges in demand throughout the year without overcompensating in terms of inventory or pricing, meaning data analysis pertaining to market demand, ordering and material availability must be performed if businesses are to maintain a competitive advantage. Teams must be positioned to accurately analyze multi-faceted metrics.
Accurate and in-depth analysis becomes even more important when teams consider fluctuations in raw material costs and supply chain issues. Data from Katana shows that between 2021 and 2022, 57% of raw materials rose in price, with 25% of those materials increasing within a range of between 20% to 100%. As multiple factors are involved in determining increasing material costs, accurately predicting and accounting for variations will likely require informed forethought.
How to Prepare for the Future
Thankfully, there are tools available to D2C manufacturers that can offer reliable assistance in navigating these complex issues. Primarily, businesses can utilize inventory management and production scheduling software like Katana’s to accurately predict market demand and improve the efficiency of manufacturing processes. By analyzing both live information and historical data, well-managed software tools can help businesses forecast demand and procure reasonably priced materials.
Additionally, inventory management tools can be integrated into existing accounting software to ensure all financial records accurately reflect live sales orders and material procurement data. Ultimately helping staff to reliably assess and measure performance to aid in developing plans for future sales periods, mitigating the risk of syncing errors during peaks of high sales activity.
With these systems well-configured and integrated, potentially turbulent economic factors such as rising material prices and inflation-related costs can be accurately predicted and reasonably accounted for in wider supply chain management calculations. By taking the time to develop such systems, D2C manufacturers are able to make critical decisions backed by reliable data.
Though there are promising signs of growth to be observed across certain aspects of the global economy, true stability doesn’t appear to be on the immediate horizon. However, by leveraging data analytics tools and smart technologies, manufacturers can mitigate some significant risks.
Focusing on key sales periods such as Black Friday/Cyber Monday reveals many consumers are prepared to increase spending in certain conditions, meaning manufacturers and retailers must be positioned to capitalize on this demand. By utilizing predictive analytics and integrated inventory management solutions, teams are well-positioned to reliably forecast market demand relative to material costs and supply chain data to minimize the impact of economic uncertainty.
Release ID: 904298