A good exercise for a retail supply chain professional is to walk over to their favorite merchant and ask the key question, "In order to ensure merchandise plan execution (or hit your margin number), what matters most to you?"
Supply Chain Digest Says... |
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| The many views of fill rates are also key to effective supplier scorecards, both on-line and in business reviews. |
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Nine out of ten times the merchant response will be on-time and complete.
Merchants can live with poorly stacked pallets, funny looking cartons, non-existent shrink wrap and improperly placed labels as long as the correct merchandise is there in a timely matter. While the other failures can affect overall supply performance and add avoidable costs, none have the intensity and impact as on-time and complete.
Why? Because in today's promotionally-driven omnichannel market place, nothing impacts the customer more than an empty peg hook.
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At the end of the day, the retailers that best understand their vendors fill rates, purchase order lifecycles and overall supply chain performance - and can share this valuable information with all stakeholders (merchants, replenishment and vendors) - are in the best position to mitigate margin risk and protect the brand.
This may be information you already have contained in your core execution systems. And while it would be helpful if this exercise resulted in your vendors improving their overall performance, it's not a requirement for you to improve your internal performance. What is a requirement is that you better understand when and where your vendor is going to fail.
How do you get this valuable information? Like most of life's questions, it's all in the data. An objective view of past results is the best indicator of future performance and will likely provide you with the information you are looking for.
 Which Fill Rate do I Measure?
Fill rate often means different things to different people. While tracking on-time seems to be fairly straight forward, how retailers measure fill rate seems to be all over the map.
The different ways retailers measure fill rate include by vendor and department, or by a vendor's initial fill rate. Others measure total fill rate but still want to minimize the number of vendor shipments. To other retailers, how their vendors fill them in relation to their posted ship windows is critically important, as supply chain managers look to smooth their receipts and minimize labor expense.
Another key metric to focus on is how well a vendor fills orders during peak season. While their performance may be stellar in June, how have they performed during say the last quarter of the year for the previous 3 years, when their performance counts the most?
A clear and flexible view of your vendors' complete and on-time performance is critical. Not only is it important for the supply chain managers to understand this key performance data, but to also share this information with all stakeholders (merchants, replenishment & vendors) as well.
The many views of fill rates are also key to effective supplier scorecards, both on-line and in business reviews.
Of course, this is all more important than ever, where an item out of stock at a brick and mortar retailer can be easily ordered on-line - maybe from your own web site, but just as likely from Amazon.com or another competitor.
The predictable result will be a higher performing supply chain that minimizes lost margin opportunities and protects the retailer's valuable brand hyper-competitive marketplace.
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