Parts 1 to 4 of The Supply Chain Collaboration Journey blog series covered the history of retailer-supplier collaboration from the 1980s till today. We discovered how retailers and manufacturers gradually found better approaches to collaboration, and more significant benefits, as their partnerships evolved, introducing point of sales (POS)data, inventory management (VMI/CMI), and collaborative planning and replenishment protocols (such as CPFR).
We also learnt that retailers – but also some manufacturers – still need to make a step change to adopt best practices such as S&OP, DRP and longer-term planning. The operational mindset of addressing day-to-day challenges in stores often stands in the way of taking such a comprehensive approach.
Engaging in strategic collaboration means the retailer needs to share more than just the next replenishment with the supplier. At the same time, true demand chain collaboration increases the focus on monitoring near-term events to remediate operational issues (making use of operational data stores).
A new level of technological maturity is required to enable this collaborative approach, incorporating more advanced planning solutions, big data stores and predictive or prescriptive analytics. Due to the potentially vast array of store-stock-keeping unit (SKU) combinations, retail forecasting and planning collaboration applications raise important scalability challenges for IT. These challenges must be overcome before a truly collaborative environment can be created.
JDA’s unique Flowcasting collaboration platform solution is both highly scalable and rich in new functionality to help industry leaders adopt this very exciting new approach to value chain collaboration. In this Part 5 of our collaboration blog series we will share the five critical new capabilities for true demand chain orchestration enabled by Flowcasting.
Five Capabilities to Supply Chain Collaboration
1: Shared network view
A single network view for planning and ordering showing how the demand signal is propagated upstream in the supply chain helps retailers and suppliers become more agile and responsive to demand changes as they occur. All upstream partners see these changes at the same time as the retailers, eliminating the latency that often contributes to the “bullwhip effect” of separate forecasts.
Understanding and sharing demand information starts with eliminating the artificial boundaries between retailer and supplier networks. The supplier’s network of warehouses and plants becomes part of the retail value chain. Why plan inventory levels across that value chain separately, ignoring the rules and policies that regulate the upstream and downstream demand propagation and stockholding?
2: Shared marketing, sales, financial and promotional plans
Working from a single plan that shows multiple order lead times to support joint sales and operations planning (S&OP) and budget planning (typically 52 weeks out) is paramount to a more responsive and agile value chain.
Retailers must exchange more than their latest replenishment order with suppliers if they wish to improve their readiness for the next promotion campaign or financial incentives program. A price discount or promotion campaign for the end consumer must be closely coordinated among the retailer and their suppliers to ensure the suppliers can react with extra production capacity and storage for these sales incentives.
Bringing the benefits from S&OP to both parties will make sure the retailer and the supplier can synchronize their actions and organize a profitable response to support the commercial activities of the trading partners.
3: Shared consumer demand forecast
As explained in my previous blog post, forecasts are still difficult to align and explode to the granularity requested by the manufacturer in more traditional CPFR relationships. Retailers do not often have very advanced DRP solutions. The challenge is to translate the independent demand from the retailer into a detailed dependent demand plan for the supplier.
The forecast, adjusted for all the latest sales, pricing and promotional inputs, must be exploded across the retailer’s network and be offset with the various lead times inherent in the network. A distribution plan for the retailer looks different than the distribution plan of the supplier as their networks require different steps and activities derived from that one common forecast.
4: Daily updates of plans of both trading partners based on real consumer demand
Without daily updates, a plan quickly becomes obsolete and out of synch with reality at the point of demand. Day-to-day order updates are the best guarantee that operational problems and service and stocking issues are addressed before the bullwhip effect can throw inventory levels out of sync with actual demand.
5: Collaborative decisions supported by what-if and root cause analysis
The icing on the cake that makes any collaboration more effective is the practice of continuous improvement. Without discussing scenarios and identifying business improvements, the virtuous cycle of supply chain collaboration will not evolve. Supply chain collaboration requires action and analysis, just like S&OP.
In the coming years, forward-looking supply chain leaders will adopt these five critical capabilities to reap the many benefits of supply chain collaboration. JDA stands ready to power this important evolution with the innovative Flowcasting solution.
For further information on how JDA and the Flowcasting solution can help you with your supply chain collaboration journey, please access www.flowcasting.com.
To read all of the blogs in this collaboration series, click here.