Expert Insight: Guest Contribution
     
     
  Oct. 19, 2008  
 

Supply Chain Perspective: What Makes CPG and Retail Supply Chain Leaders Different

 
     
 

Being Demand-Driven and Collaborative is Key; Using Scenario-Based Planning

 
     
 

Supply Chain Digest’s Dan Gilmore recently spoke with Karin Bursa, Vice President of Marketing at Logility on several themes related to the Consumer Goods-to-Retail Supply Chain.

Gilmore: What do you see as some of the key trends in how consumer goods manufacturers and retailers are improving their supply chains right now?

Bursa: We are seeing consumer goods manufacturers really start to better leverage downstream data like Point of Sale (POS) information to get as close to the end consumer as possible and work more collaboratively with retail partners. Companies that have successfully integrated POS data into their supply chain planning processes have become more agile in responding to market-specific changes. If you can get increased visibility into timely demand signals, then inventory, production and replenishment schedules can be refined to respond to short-term demand fluctuations.

Companies that are not leveraging POS demand signals are still relying on shipments or orders to the retailers’ distribution centers, and that doesn’t reflect specific consumer purchasing on a weekly basis. These companies have less visibility, and that creates a disadvantage that may lead to higher inventory levels and increased supply chain costs.

Bursa Says:
The most successful S&OP processes have a demand-driven foundation that becomes the basis of supply and distribution synchronization. Most leaders find that scenario-based planning becomes critical so they can evaluate of a variety of business alternatives during the Executive S&OP meeting, which typically occurs on a monthly basis.

What do you say? Send us your comments here

Gilmore: What do you see as the key differences in what supply chain performance leaders are doing versus the middle of the pack?

Bursa: I think leaders leverage their strengths. They take a very comprehensive view of their supply chains and strive for balance, and they make conscious tradeoffs between service levels, costs, and innovation. They also have an ability to evaluate multiple scenarios across their global networks, and can well align near-term operational tactics with the overall business strategy.

Helping to focus your high-value human assets - your people - on where they can have the biggest impact is also critical to driving success. The built-in performance management capabilities in some supply chain software, such as Logility Voyager Solutions, enable companies to put certain tasks on “autopilot” and then only alert team members to issues that need further investigation, creativity or a proactive phone call to the customer or supplier.

Gilmore:  What's happening in terms of supply chain technology developments or the way companies are deploying the technology that many of our readers might not be aware of?

Bursa: I would say that, clearly, leading consumer goods manufacturers are climbing out of their planning silos many of them have had in the past and are synchronizing their global supply chain networks with formal Sales & Operations Planning (S&OP) processes.  The added visibility they achieve as a result is leading to better product availability, lower costs, higher margins and a global team that is actively working against the same plan. You just can’t be competitive today without that.

There’s not a cookie cutter for S&OP. The process should match each company’s unique environment and support higher accountability on both the supply and demand sides, but still allow some level of operational flexibility. The most successful S&OP processes have a demand-driven foundation that becomes the basis of supply and distribution synchronization. Most leaders find that scenario-based planning becomes critical so they can evaluate a variety of business alternatives during the Executive S&OP meeting, which typically occurs on a monthly basis.

The best way of doing this is having a pre- S&OP meeting that focuses on demand planning. During this pre-S&OP meeting, the demand team should create a “best case” demand plan along with alternative scenarios. These scenarios should be focused on issues such as bias in the forecast, high or low, demand shaping opportunities and promotions, as well as the lead time for new product introductions.

With so many variables in today’s global market, your S&OP process needs to support multiple scenario planning. Each plan or scenario needs to show the expected impact on inventory, production schedules and current budget plans. With this valuable insight, your executives can make more informed decisions.

Gilmore: Are companies getting better at forecast accuracy? If so, how are they doing it?

Bursa: There is no question that leaders continue to get better at forecasting accuracy. AMR Research has reported that Demand Forecast Accuracy is the most important single supply chain metric in their Hierarchy of Supply Chain Metrics because it is a leading driver of proper inventory investment, customer service levels and distribution needs.

Instead of limiting forecast accuracy to product family or item-level assessments, leading companies are forecasting demand and analyzing accuracy by a number of additional attributes including customer/channel, region, season and stage-of-product life cycle. You need the ability to assess a multi-dimensional demand plan that can be sliced and diced to serve a wide variety of roles across your company from supply chain to sales, manufacturing, distribution, customer service and financial.

Gilmore: What are you seeing in terms of collaboration in consumer goods-to-retail supply chain?

Bursa: Collaboration is an ever-evolving process. While leading consumer goods manufacturers are looking at unique ways to leverage their relationships with their trading partners, many manufacturers are still working on establishing trusting relationships where they can exchange forecast and replenishment data with their retail customers.

We see some innovative manufacturers collaborating with customers and suppliers on product design. Historically, collaboration between trading partners commenced as new products were ready to launch with planning the initial roll out and promotions. Now, companies are starting to work with customers and suppliers on design elements. This accelerates new product introductions and reduces problems including out-of-stocks and eliminates some of the surprises that arise in the rollout process. And let’s face it; if you’re not bringing new innovative products to the market, you’re probably losing consumer loyalty and market share.

Agree or disgree with our guest expert's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the web site. Upon request, comments will be posted with the respondent's name or company withheld.

 
 
 
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