You know you have a higher quality product to offer customers - so why are your competitors sales skyrocketing while yours are barely keeping pace? For manufacturers and distributors serving the retail market today, how to get goods into the hands of consumers is just as important to gaining a competitive advantage as the products themselves. Because of the escalating impact of the supply chain on business success, there is a critical need to understand the true drivers of consumer and market demand. This understanding can help build closer relationships with customers, lower operating costs and enhance overall business performance.
Many companies spend significant amounts of time and money investing in infrastructure technology to automate supply chain decisions and provide a framework for integrated decision-making. Now the challenge is to leverage these investments in a big way. Companies are seeking to integrate and optimize processes in order to model a more dynamic and global supply chain. They need to be able to scale exponentially to handle the explosive volumes of data associated with integrating point of sale (POS) information into planning and execution processes so that they can respond quicker to consumer preferences and market trends. They are looking for technology that can optimize and balance inventories across the entire supply chain, so inventory levels are optimized and the amount of working capital needed to deliver high levels of customer service is reduced. And companies want technology that provides the comprehensive modeling needed to continuously evaluate their evolving supply chain - ensuring that operational decisions are being driven by an optimized network that adapts over time.
This all sounds great, but many of you are asking, Where do I start and what key areas should be my focus? The following are five best practices for using demand data to drive decisions and optimize business performance.
Adopt a demand-driven, consumer-centric approach to planning and forecasting. In todays global economy, the battle of the supply chains is no longer being fought on one continent or in one area of the world. Global sourcing competition, localized market events and unstable economic conditions are colliding with fast-changing consumer buying trends, posing a challenge to wholesalers trying to achieve forecast accuracy. In addition, retailers engaged in their own competitive struggles are increasingly intolerant of late deliveries and out of stocks, and material and operating costs continue to threaten profit margins. To combat this, there must be a shift from outdated push models driven by a view of orders and shipments to consumer-centric pull models, driven by a view into POS sales and enhanced promotional collaboration with retail partners.
Companies must anticipate and base plans on not only which products consumers will buy but at what price point, By creating a demand plan for each product; leveraging multiple history streams and forecasting algorithms, classifying products based on demand patterns and differentiating demand being driven by external factors from actual demand history, companies can gain a clearer understanding of what consumers want. This insight can mean avoiding costly mismatches of demand and supply that can result in missed opportunities, lost profits, too much or too little inventory and poor customer service.
Enable your planners to focus less on statistical analysis and more on strategic demand management. The role of planners has shifted as advanced forecasting technologies have emerged that can select the most effective algorithm, optimize statistical parameters and apply advanced forecast consumption. Now, rather than spending time on the management of seasonal-baseline demand, planners can be freed up to focus on the more strategic side of things, including management of product introductions as well as collaboration with sales teams and the end consumer. Information gathered from departments including sales, marketing, product management and customer service can be invaluable. Often this information is a more accurate, real-time predictor of customer demand than relying solely on historical buying patterns.
For example, by collaborating with internal marketing teams, planners can gain insight into the mind of consumers in real time. Web 2.0 is just one unexpected marketing tactic sophisticated companies use to connect with consumers on a more personal level.. Based on historical data a manufacturer may plan for a large number of capris to be sold in the spring and summer. Yet, an evaluation of online surveys and outfit builders launched by the targeted retailer may have revealed that jeans are a far more popular item. By working with marketing, planners can gain access to this information and take it into account when adjusting plans in real time. So the number of capris can be reduced and the number of jeans increased, ensuring greater alignment with consumer demand.
Collaborate in real-time with customers and trading partners. When it comes to successful supply chain management, you cant communicate too much. In the fast-moving world of consumer goods manufacturing, maintaining close and frequent electronic communications with customers, suppliers and other business partners is the only way to ensure that all participants share a single, accurate view of demand.
Companies that drive their supply chain decisions from a fragmented view of shipments and orders are at risk of losing market share and competitive advantage. Best in class companies have developed collaboration practices such as sharing forecasts, enabling the adjustment of replenishment plans and sharing upcoming shipment requirements in order to synchronize activities. Collaboration practices can be critical in the success of new product launches, trade promotions, events, seasonal surges and everyday operations. Implementing technology and processes that open the lines of communication so that various time-phased data (such as category, region, key customer or distribution center forecasts, replenishment plans and transportation schedules) ensure the right amount of inventory is available to meet customer demands.
Involving senior level management is a critical step in the collaboration and supply chain management process. Executive buy-in is often necessary for companies to procure the IT solutions necessary to achieve real time collaboration and supply chain management. In addition, senior level management can drive, communication between different departments and across company divisions - even outside the four walls. Often, the best way to get the attention of c-level executives is to prove how accurate forecasting, close understanding of consumer demand and supply chain visibility drives revenue and value to bottom line.
Get the most out of data by using performance management technology. Advanced supply chain performance management is indispensable to companies seeking to maximize the value of information captured within their supply chains. By managing key performance metrics, companies can identify critical business trends and even launch new products to meet changing demand. Consider for example a company that produces hardware for cabinets. Traditionally, it may provide a high, middle and low end door knob. However, it may determine based on overall sales of middle and high end knobs that in todays struggling economy it would be more profitable to provide customers with a wider selection of lower end knobs. Likewise, information gathered through measuring key performance indicators (KPIs) can also suggest the expansion into new, profitable markets.
By analyzing current and historical data, companies also gain greater insight into financial and operational performance, as well as identify and remedy performance gaps that may be eroding profitability.
Integrate vendor managed inventory programs into your planning processes. According to one industry study, vendor managed inventory (VMI) is already used by almost one-third of wholesaler-distributors and its use is expected to double over the next five years, especially among companies in the finished retail goods, building materials, industrial and contractor supplies industries. VMI programs provide invaluable insights into early market trends based on retailers POS data. Companies can shift production plans, build optimum orders in real time and avoid having inventory sit in the corner of a warehouse, in a stock room or on a loading dock losing money. Additionally, VMI programs enable access to extended network inventories that can significantly improve the accuracy of consumer-level demand forecasts.
While some manufacturers are hesitant to cede control of their inventory, a collaborative VMI and replenishment program typically results in increased planning efficiency, lower inventories and higher customer service levels. For example, a sporting goods distributor utilizing VMI and vendor managed replenishment (VMR) solutions can better align with their retail partners needs, even down to the store level. With better insight into customer demand for specific items, the distributor can actually maximize their retail partners inventory investment by reordering or replenishing authorized items only.
The old adage information is power is certainly true when it comes to the supply chain, but only if it is properly managed. Each of these five best practices is designed to help you use the information you already have to get one step closer to your customers.
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