André Martin, the father of Flowcasting and DRP, and Fred Baumann, JDA GVP of the Flowcasting business unit, have presented the principles, advantages and early customer success stories of the ground-breaking Flowcasting process during several well-received webcasts. In Part I of this series Supply Chain Nation asked Baumann to provide a brief summary of the learnings from those webcasts. Here we ask Baumann what a Flowcasting-powered world might look like.
SCN: The frictionless collaboration that Flowcasting enables is a radical departure from current approaches. What would the retail—manufacturing world look like if there was wide-spread adoption of this technology?
Baumann: First and foremost I think there would be far less expediting and fire-fighting driven by supply chain surprises. I often ask manufacturers and retailers what percent of their day is driven by exceptions caused by external factors outside of their company. Sixty to seventy percent of the time the fire-fighting is being driven by factors outside of their supply chain—what their customers are doing or shortages on the manufacturing side for retailers, for example. We would see a lot less fire-fighting and expediting with Flowcasting because there would be far greater visibility with a proactive common plan between the trading partners. Thus, they can be much more strategic than when partnerships are transactional or even adversarial. Because when those surprises happen, conversations become much more heated, you are focusing on the short-term rather than strategically growing the business.
Manufacturers and retailers can become more agile as they can see opportunities as soon as they occur. They are not dependent on their trading partner to tell them when an issue arises. They can proactively address issues without the latency of waiting for the other trading partner to bring an issue to their attention.
The Flowcasting approach enables retailers and manufacturers to create joint value by simulating ways they can take cost out of the supply chain rather than shifting costs up and down the supply chain, which ultimately means delivering higher on-shelf availability at lower total supply chain cost. It’s about how to collaborate more effectively and making sure we have the right product flow to support promotions and new product transitions. These are some of the things trading partners can focus on versus putting out fires.
In the new world of widespread Flowcasting adoption we will also have far less buffer inventory. Due to the expediting that occurs today, there is a lot of buffer inventory that is held to protect both the manufacturer and the retailer from outages. As Flowcasting adoption grows and companies have better visibility, they can lower those inventory pools and be more cost-effective in investing those dollars in product innovation and growing market share.
Another key item for what the supply chain will look like in the future involves S&OP, which has been a seminal capability for the past 30 years, especially on the manufacturing side. We are seeing greater retail adoption and Flowcasting is providing much more timely inputs and valuable insights to the S&OP process. We’re not just analyzing orders or shipments out of manufacturing DCs and plants, we’re getting faster visibility to issues that must be solved down to the shelf and exposing gaps in the supply chain that are connected to the attainment of a joint business plan .
If I understand, for example, that my rolled-up, bottom-up plan has got a $20 million gap between my topline S&OP plan, and I can see that time-phased into the future, I can start to do things with trading partners to close that gap before it’s too late, whether that is running incremental promotions or perhaps accelerating a new product launch to capture the additional revenue to close that business plan gap.
I think production costs and distribution processes are also going to be much more efficient because there is less bullwhip effect. You are not building a production plan off of shipments into a DC. You have better visibility from a time-phased plan that is more reliable because it is collaboratively built in the shared Flowcasting model.
Another key change you will see as we get critical mass adoption in the marketplace is that supply chain flow will be more agile. Fixed distribution flows are going to be a lot less standard. Companies are going to look at volumes throughout the year and be able to skip supply chain nodes where it makes sense. In high volume periods, with high cube or high weight products, it might make sense to bypass finished goods manufacturing DCs and go direct to a retailer DC or even directly to the store. In the simulation that Flowcasting helps support, you can make good decisions on when that should happen.
You’ll also see more dynamic routing on the transportation side and be able to review alternate flow paths. You’ll be able to see more opportunities for cross-docking because we can flow product more seamlessly and more rapidly and not have to buffer for risk by putting product away in the DC in many cases.
I think we will also see more trading partner “co-opetition” where competing manufacturers could be part of a shared warehouse, creating more 3PL opportunities to share loads or warehouse space in a collaborative manner. There are opportunities to take a lot of cost out of the system. For example, you may have a very slow-moving item where the retailer has to order a certain order multiple that creates excess days of needed supply, so there are opportunities to create cost synergies by combining slow velocity supply items/manufacturers into shared orders with the greater flexibility and visibility that Flowcasting enables.
SCN: For those who want to experience what this new Flowcasting-enabled world can be, Baumann will provide a roadmap on how to get there in his final post in this series launching October 29, 2014.