Consumers are fickle, picky, hard-to-please, even harder to predict, and prone to disappoint. But they also drove $3.6 trillion in retail sales last year in the United States alone, according to U.S. Census Bureau statistics. As a result, the hard-pressed players in the retail sector remain laser-focused on getting the right product onto the right shelf at the right time.
But industry observers say that leading companies in the sector are shifting their attention from managing the movement of products through the supply chain to better managing the flow of information about those products. For retailers and their manufacturer suppliers mastering the data challenge is proving to be the key to improving supply chain performance.
For some perspective on this challenge, in the wake of the recent National Retail Federation conference in New York, Supply & Demand Chain Executive spoke with a cross-section of executives with experience in various segments of the retail supply chain.
Thom Jones' perspective on the retail supply chain is, by his own admission, influenced by his current post with Little Neck, N.Y.-based Leviton Mfg. Co. Inc., a leading North American supplier of electrical and electronic products to the retail sector. "Since my position is vice president of materials management," says Jones, "I'm very much focused on inventory and forecasting." And, Jones continues, the key to ensuring high inventory turns and accurate forecasting, is transforming data — whether from point-of-sale (POS) systems or inventory and production control systems — into useful information that planners can use to predict consumption at the store level for each of the company's 25,000-plus stock-keeping units (SKUs).
Leviton has been using a suite of demand planning solutions from St. Louis-based Demand Management Inc. (DMI), a subsidiary of Logility, to manage the retail side of its business. The manufacturer is using DMI's Demand Solutions Forecast Management (DS FM) application as a forecasting engine and data warehouse; the DS Requirements Planning solution, for demand requirements planning; DS Feedback, to collect the sales force's frontline feedback on forecasts; and DS Stores, a point-of-sale analysis tool with vendor-managed inventory functionality. While Leviton currently does not use the VMI capabilities of DS Stores, it is using the analytical tool to transform the data from retail customers' POS systems into information that will be useful for the company's planners.
The Feedback application has proved important on the retail side of Leviton's business, Jones says, because of the high level of involvement by the company's marketing and sales groups in the forecasting process. "There are a lot of promotions, modifications to the product sets, changeovers in packaging and product planning that can greatly impact how much inventory we need to carry at any time," Jones explains, "so our forecasts need to be very closely watched on those items, and our inventory management needs to be co-handled."
Another challenge that the company faces specifically on the retail side is working with the large central buying offices at its major retail customers. "You can feel the repercussions of a central buying office placing a single batch of orders for the entire nation, which could amount to many months of supply on their normal ordering patterns," Jones says. Leviton prides itself on being able to respond to those high-impact orders with inventory on hand, but to be cost effective the company maintains additional production capacity so it doesn't have to carry excess inventory. In addition, Jones notes that the central buying offices represent an opportunity for Leviton to work more closely with its customers, using the POS data coming in from the customers to help those buying offices understand which inventory, and how much inventory, should go where within the customer's store system. "The point-of-sale analysis enables us to look at different products that sell better in different areas of the country, so that we can address those items to the central office and say that this area needs to stock more of this inventory, and this area needs to address this inventory situation," Jones says.