Master Big Data, Master Your Supply Chain.
The UK’s retail supply chain managers know they’re holding too much stock but are worried that cutting it will compromise availability. But, according to a new survey of senior executives involved in supply chain planning*, boosting availability without increasing inventory is the most common priority (63%) amongst senior retail supply chain executives while the top challenges regarding forecasting are forecasting demand for new products (72% of retailers), coping with changes in the rate of sale (69%) and forecasting effectively for promotions and promotional lift (66%).
The problem is overwhelmingly one of volume and complexity. If it was already difficult to manage product launches, promotions, seasons and short-life-cycle items then the growth in the number of channels – click-and-collect; online-order-home-delivery; traditional in-store – has simply acted as a multiplier on existing challenges.
So what is the answer? I’d like to say ‘it’s simple’. And in a way that’s true. Faced with complexity the answer is to simplify where you can and accept the complexity where you cannot.
Almost without exception it helps to centralise forecasting and replenishment. Let your system master your POS and inventory data and you’ll know what sells, where and when. By getting a good picture of past sales, that same data can give a remarkably good prediction of future sales, availability and likely wastage – by store, store-group, product, product-category etc. – at any given point in time and under a variety of circumstances.
But to do this you also need to really drill down into your data – from properly tagging SKUs, to sell-by dates on fresh food, geographical information and weather data to study relative performance and trends.
Highly granular data also helps with product introductions and promotions. New products, by definition, have no sales history. But armed with detailed information about your other products a good supply chain system can find the best match to act as a template until a product has its own track record. Likewise promotions – the more details of previous promotions you keep in terms of discount, store or website positioning, marketing and so forth, the easier it is to model forecasts for the next campaign on previous ones.
Then there’s another key issue; allocation. How do you ensure that stock is available to the channels where it’s needed? Almost half (46%) of the omnichannel retail businesses surveyed maintain separate stock pools for disparate channels and for most this will mean excess inventory for no real gain. Given the way that channels naturally work together, having the option of managing one’s entire inventory within a single operation resource has considerable advantages, not least because it maximises choices and flexibility, and doing so is increasingly easy.
When it comes to demand forecasting, for instance, it can become quite apparent how promotions can boost the demand for one item but reduce it for similar items outside the promotion. By the same token it’s possible to measure how an in-store campaign can affect online demand.
So having the facility to be able to forecast for the entire operation and allocate stock efficiently from any point in your supply chain to any sales location gives you far greater flexibility and reduces the possibility of remaindered or wasted stock.
Making Big Data accessible
All this requires handling a lot of data. But the new generation of supply chain management systems do just that – they make big data accessible and useful. Routines that used to have to run overnight can now be performed, in near real-time giving a minute-by-minute snapshot of where the business is now. What’s more, with the latest generation of supply chain systems, implementations can be completed in a few months or even weeks, and a full ROI realised in a similarly short time frame. After that it’s all cash on the bottom line. And that’s a proposition any business person understands instinctively.
Above all though businesses need to build in agility and flexibility. If there’s a given in retail it is change. Retailers are busy thinking omni-channel but customers are still, predominantly thinking simply of ‘shopping’. Today’s retail challenge is to build any new sales route into an offering that shoppers experience as seamless. That sort of flexibility requires not just that you master your data but that you really make it work for you so you’re ahead of trends rather than constantly chasing after them. The most successful retailers of the future will be the ones that are ready for the next wave and that ride it.
Mikko Kärkkäinen, Group CEO, RELEX
*Martec conducted detailed research with senior supply chain executives from a cross section of British retailers accounting, between those surveyed, for 23% of the UK retail market by sales. Source BRC 2013
**A downloadable copy of the full ‘State of the Retail Supply Chain 2015’ research is available from the RELEX website.