If you’re like me you will walk into the shops in October and get frustrated at the christmas gifts starting to be put on the shelves. However during a recent workshop I got an insight into demand planning and what this means for supermarkets or shops and how fundamental maths is incorporated.

So what exactly is demand planning? Click here to find out.

After watching this short clip we got the opportunity to experience demand planning for ourselves. We were told we had £5000 to spend to start with and there was some rules for playing the game:

• Decide how you will spend your money. Complete the order form and submit your order.
• You can only order a maximum of 5 unique SKUs per sales period (quarter year), you can order less than 5 SKUs.
• Keep a track of what you have ordered. Complete your stock list. Include any cash at bank at end.
• When your sales figures come in calculate value of sales (unit selling price x quantity sold) per item SKU.
• Keep track of any stock left each period (unless it is a ‘write off’). Calculate the value of this based on purchase value. Calculate your balance sheet business net worth (hope fully increasing each period!).
• Now place orders for next period (quarter year).

Me and my partner decided we would spend our whole £5000 to start with and decided on practical food that people would buy every day such a bread, milk and bananas however we also took a risk and ordered 60 units of champagne and 1500 units of beer as we noticed that these had quite a high mark up values. Our strategy paid off as we sold between 80 and 90% of our every day items and between 50 and 60% of our champagne and beer giving ourselves a nice profit of £6290.

The following months July – September, we decided that the best products to buy would be things like soft drinks and ice cream wafers as it was the summer months. We also had units of beer and champagne left over to sell. Again we decided to spend all of our money in the hope that the more money we spent the more profit we would make. Again this worked giving us a massive £18,295 profit.

As the game continued we used the same tactics of ordering products based on the month, e.g frozen turkeys on the lead up to christmas and spending as most of our profit each time. By the end of the game we had turned our £5000 into a whopping £69,222.

We had lots of fun playing the game but it got me thinking about this being someones job. For somebody to successfully do this job and make the organisation/ supermarket chain etc profit fundamental maths principles must be used. Things to think about are products that will sell at certain times of the year, how much of a certain product will be sold and what products will be wasted if not sold and what can be kept.

Some maths principles involved are:

Looking at statistics and data from the previous year to calculate how much of a products will potentially be sold.
Analytical skills
Problem solving
Noticing pattern forming in sales
Calculations