How to Leverage Weather-Driven Demand Analytics for Reporting
Originally published by Planalytics’ partner, Clarkston Consulting
Weather has a direct and significant impact on business performance, from foot traffic patterns to sales results to targeted advertising decisions and more. According to the American Meteorological Society, over 3% of all retail sales are directly affected by changes in the weather, which translates to $1 trillion in today’s dollars.
For retailers, there’s no other external variable that influences consumer demand as frequently, directly, and meaningfully as a change in the weather. This article will focus on a critically important use case of weather analytics: reporting.
What is Reporting?
Reporting on the impact of weather is one of the many use cases for weather-driven demand analytics. This is accomplished once you have an understanding of how, when, and where weather affects your business, including how to measure and manage its impact on consumer purchasing.
Performance reporting is a consistent and critically important activity for all businesses, providing a benchmark against which goals and objectives can be measured. Weather-driven demand analytics enable businesses to get a true read on actual performance by understanding how, and how much, the weather influenced results.
Use Cases
There are several common use cases for weather-driven demand analytics in reporting, including:
- External Reporting – Companies that report to investors and external stakeholders can leverage weather analytics to help explain how the weather supported or hindered overall business results in recent periods.
- Internal Performance Analytics – Businesses are consistently evaluating their performance, which often includes competitive impacts, macro-economic influences, and more. Having a single version of the truth related to the actual impact of weather enables a more accurate view of performance.
- Promotional Analysis – Businesses that are promotional are regularly looking to understand the effect of those promotions (advertising, promotional events, price changes, etc.). Weather-driven demand reporting enables businesses to analyze their promotional performance more clearly through a ‘weather-adjusted’ perspective.
- Sustainability Reporting – For some retailers (particularly those that offer perishable products), weather-driven demand analytics enables the quantification of waste reduction, which, in turn, can be converted to carbon emission savings. For many businesses, reporting on these Scope 3 emission reductions supports overall sustainability goals and related reporting.
Key Considerations
Below, Clarkston experts Robin Dolan, Retail Operations, and Anand Nataraj, SAP Supply Chain, provide additional insight into what clients should think about as they incorporate weather-driven demand analytics into their reporting strategies.
How can retailers get started easily by incorporating a new demand signal like weather analytics into reporting?
Robin Dolan: Retailers have to first start with what use cases are impactful to them, but as you look around a brick-and-mortar environment, it will not take them long to find many – most obviously demand forecasting, but weather analytics can also help with better store staffing models, labor planning at warehouses, and even with decisions on the types of packing that a retailer may want to use in shipping.
Anand Nataraj: The critical piece of evidence that clients need to understand is how weather will affect the forecast. Using historical data and overlaying it with weather analytics is a great input for their IBP (Integrated Business Planning). SAP CAR’s demand data framework is a great tool where clients can pull in data from different sources – for example, POS data can be used as the base, and it can be overlayed with weather data to better forecast demand during a weather event.
What are some common use cases for internal reporting?
Robin Dolan: As stated in my previous response, most KPIs dealing with store operations can use weather analytics as a way to make better decisions. Any place where there is staffing, supply chain, and even marketing decisions can use weather to better forecast and execute store operations.
What are some common use cases for external reporting?
Anand Nataraj: Supply chain visibility across the value chain is the most obvious use case. Being able to share manufacturing forecasts up and down the value chain helps everyone involved make better forecast decisions and can serve as a waste reducing factor. SAP Supply Chain collaboration is a great tool that has many uses in this regard. If partners have access to Realtime POS and inventory data, the forecast wouldn’t be perfect, but the more accurate you are with your partners, the better off clients are going to be.
Robin Dolan: Using weather to work with suppliers to prevent disruption is huge. In events where weather plays a large part in the outcome, having visibility and solutions that give strong indicators on demand signals is key in having successful joint partnerships that lead to great customer outcomes.
How does weather analytics fit into sustainability reporting?
Anand: The overlay of weather analytics can help with planning out energy consumption based on weather patterns, determine logistics and distribution routing in the most effective ways, and execute product distribution whether the skies are sunny, or a storm is brewing.
If you’re looking to implement or optimize your demand forecasting systems through the power of weather analytics, with a platform like Planalytics, Clarkston Consulting’s analytics and SAP teams can help. Contact our experts today to learn more.