SUPPLY CHAIN STANDARD SEPTEMBER 2008
www.supplychainstandard.com
be a new world order, albeit one that may further
adopt western ways of doing business, and one
which may yet turn out to be different to what we
currently view as an East-West full frontal.
Our ways have been proven over many many
years; business, being so global, will most likely
continue to move along the general western path.
Banks, institutional investors, and serious importers
and exporters, will demand certain standards be
maintained and strengthened. Surprises may be in
store though, so the pressure to be lean, mean and
nimble will certainly intensify.
On that subject, the agile, or smart, enterprise
will be able to take advantage of most situations,
whether that is setting up manufacturing in China
(or Vietnam!), or relocating it to the UK/Europe to
take advantage of any number of domestic,
technological, currency or simple cost/resource
pressure situations.
Agility means thinking outside the
box…getting outside the comfort zone and
looking at a number of ‘what ifs’. What if we did
Plan A, and benchmarched it against what we do
now (Plan WWDN) and against Plan B, just in case
Plan B is the better route to go down? If you’re
thinking smartly, A or B should be better than
Plan WWDN.
To take that step means a little courage and the
realisation that any world order can be hard on a
business unless the business adapts and changes.
What does all this mean for the supply chain? It
will most likely have to be different; to be debottlenecked;
to be re-planned; to be truly smart
and agile. Most importantly of all, it will need a
whole new way of thinking.
JEFF SCREETON IS DIRECTOR OF ACEONA
ease-of-deployment in mind, in some cases
reducing initial rollout time from weeks or
months to just a couple of hours.
Another drawback to mobility adoption has
traditionally been the significant upfront
investment required. However, one of the
biggest growth areas is now in applications
delivered as a service. From a payment
perspective, this allows organisations to pay on a
per user per month basis, meaning that if
something isn’t working, it can very quickly be
changed or modified – a much more palatable
model for most companies.
Although these factors have certainly been
conducive to recent increases in supply chain
mobility rollouts, the biggest case for mobility is
that as customer choice continues to expand, all
businesses will eventually recognise that
improving internal processes, customer service
and overall agility are not just competitively
advantageous –they’re a competitive necessity.
RIKKE HELMS IS MANAGING DIRECTOR
MANAGEMENT.
OF EMEA, DEXTERRA.
SHARING THE CRYSTAL BALL
With consumer budgets under pressure, supply chains risk
becoming awash with unsold goods – a little attention to
forecasting might just be timely.
PENELOPE ODY
Along with the current spate of profits warnings
and“disappointing”results, we’ve all noticed how
retail clearance sales seem to start earlier and
earlier each year. Long ago and far away they were
in mid-January and July, now mid-December and
early June seem more normal. This year the“sales”
seem to have been fairly continuous.
Clearing the remnants of old stock to make
space for new season merchandise is as much a
tradition in the non-food arena as the 5pm
markdown of fresh produce that is clearly moving
rapidly past its best, in the supermarket space.
Clearance sales and discounted promotions may
make space on the shelves and boost turnover but
they do very little to enhance profitable
performance. Over the past few years
“optimisation”has very much been the name of the
game in retail supply chain execution. We have had
them all: price optimisation, promotions
optimisation, space optimisation and – of course –
markdown optimisation. But, as more sceptical
supply chain experts have also pointed out over
the past few years, markdown optimisation is also
an admission of failure.
In good times most retailers can live with such
occasional failures. In bad times it is very different.
Small wonder then that at this summer’s U
Connect event in Dallas* forecasting was very
much front of mind. “Forecasting was definitely
on many companies’ agendas,” said John Radko,
chief global technologist at GXS. “Discretionary
spending is being badly hit in the current
recession and all businesses operating in this
sector need to match stocks to demand and
improve performance.”
While for many retailers “forecasting” is more
about gut feel and guesstimates there have been
some notable exceptions: Entertainments UK, for
example, under its then supply chain director Phil
Streatfield, implemented a TXT solution that
allowed it to forecast likely sales of new CD and
DVD titles within hours of release. TXT’s first
customers were in the fashion sector and it has
become adept at helping companies predict
sales of new lines based on historical
performance: if you sell x in the first few hours
then likely total market might be Nx during the
life of the product, and so on.
Forecasting sales of staple or repeatable lines is
rather different and this is where“flowcasting”has
its supporters. This starts with forecasts for every
product in each store rather than working on an
RDC or national level. Once the store has made its
sales forecast this can be correlated with existing
stocks and required deliveries, which in turn are
extrapolated to RDC requirements, over the time
period under review, and ultimately to
manufacturing production forecasts. Exponents
claim that flowcasting can reduce out-of-stocks to
just one to two per cent – compared with the more
usual eight per cent-plus while total supply chain
inventory can be cut by 30 per cent or more.
Reluctance to implement flowcasting
techniques may, in part, be due to the fact that it
requires significant collaboration between retailers
and suppliers – and not many trading partners are,
as yet, quite so eager to work that closely.
Collaboration on forecasts involves trust and
mutual confidence so neither partner is tempted to
add in a little extra“safety stock”at each stage.
Equally, flowcasting depends on long-term
commitment with forecasts as much as a year out
and good supply chain visibility to track products
at every possible location from manufacturing
plant to shelf.
Flowcasting depends
on long-term commitment
with forecasts as much
as a year out.
SCS:VIEWPOINT 09
Such long-term planning is clearly less easy
during a downturn as it is difficult to predict
just where consumer cutbacks will fall: equally,
collaboration becomes even more important at
such times. Those with memories of previous
recessions will recall that retailers – especially
the largest and most powerful – can be quite
ruthless when it comes to cancelling orders
and pressurising suppliers on price to maintain
their own performance. In the days when there
was a large and competitive supplier base to
choose from they could probably get away
with such behaviour.
In today’s global marketplace it is rather
different – especially with those BRIC economies
showing rather better growth opportunities than
poor old Europe. If retailers want to keep their
suppliers on-side then perhaps time spent on
some collaborative and realistic demand
forecasting sooner, rather than later when those
orders need to be cancelled, might just prove to be
a good investment.
*U Connect – now in its eighth year – is organised by
GS1 US and VICS and is held each June.
PENELOPE ODY IS A REGULAR COLUMNIST FOR SCS
AND IS A RETAIL MARKET SPECIALIST.
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