SUPPLY
THE DARK ART OF R
The key to optimising today’s retail supply chain is having the IT architecture and data to accurately forecast what products need to be where and when. Combining that with the very best price and profit margin to meet demand completes the process, Alison Ebbage reports
etailers have always worked hard to get the very best supply chain management in place, but in the
past 10 years changes in the global marketplace and the demand for omnichannel customer experiences have modified the existing supply chain parameters. Supply chain logistics need to change accordingly. Customer visibility is key: research by vendor Oracle in December 2013 showed that 93% of consumers wanted to understand and see immediate product availability. In fact, 90% reported that they would not wait
for a product to come into stock and would shop elsewhere for items if they were out of stock with their first choice of retailer. There is also a strong link between availability, loyalty and spend, with 40% admitting to being more loyal and 38% likely to spend more with a retailer that provides clear and reliable access to information about product availability. Clearly, the demand for accurate product
availability and information is growing among consumers; but this serves to place pressure on retailers to integrate demand forecasting, planning, merchandising, supply chain, marketing, and commerce capabilities to assure a seamless and accurate customer-facing experience. Ruth Jackson, retail consultant at SAS, commented: “Retailers are under more pressure to balance their scenarios due to the omnichannel expectation of customers who want to have a similar or same customer service experience no matter what the channel. This places retailers under pressure to deliver these capabilities. Behind the scenes the retailer needs to be able to balance inventory and availability and be able to decide on an optimum model for each of a range of scenarios. This is all underpinned by accurate forecasting in the first place.” Having the right statistics to forecast demand levels
and factor in variables such as weather, a competitor having a special offer or a celebrity wearing a certain piece means that rest of the supply chain at least has a chance of working more efficiently and that the analytics to understand where stock is and where it is needed and how to do that profitably can be better managed. Consumer packaged goods (CPG) giant Nestlé is a good example of this. Its Nestlé Direct
40 Autumn 2014
Store Delivery in the US is the largest US frozen distribution store delivery network. “Our existing solutions did a poor
job of forecasting demand around promotions,’’ explained Geoff Fisher, director of demand and supply planning for Nestlé. Data was also scattered in numerous locations and in some cases was only centralised on a weekly basis. Forecast accuracy was decreasing by the year. “It was driving a
lot of service issues and increasing our carrying costs,’’ said Bill Grah, senior manager for strategic sourcing at Nestlé. Nestle is using SAS Demand-Drive Forecasting. It interacts with the Nestlé sales team’s promotional planning system. The sales team will enter its promotion details and SAS will project the associated lifts. These promotional plans are then used to drive
the forecast used by the supply chain group to ensure product is available to meet consumer demand. It invested in this new architecture capable of better data analytics to improve forecast accuracy and drive better interaction with the sales team. “We actually exceeded our original projections,’’ said Arnaud Joliff, director of supply chain integration at Nestlé. “Forecast accuracy improvement has driven safety stock, inventory days on hand, storage costs and freight costs reduction. By gaining a few points of accuracy at the national level we have generated supply chain savings immediately. The accurate forecasts have even benefited areas such as efficient route planning.” Morgan Day, vice president of corporate and account strategy at retail distribution software
www.retailtechnology.co.uk
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