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RETAIL: Meeting the Promise of Flowcasting
Applying distribution resource planning concepts to the store can get manufacturers and retailers working from a completely integrated supply chain
Andre Martin (right) and Darryl Landvater of RedPrairie Collaborative Flowcasting Group
By André Martin and Darryl Landvater
Distribution resource planning (DRP) has been helping consumer packaged goods companies and other manufacturers with supply chain planning for decades. Every major manufacturer is using DRP, and the premiere supply chain planning vendors embed DRP into their products. DRP is the de facto industry standard.
Now the promise of DRP has reached the storefront, extending its capabilities across the entire supply chain. Called Flowcasting, it applies DRP concepts to the store and facilitates collaboration among manufacturers and retailers. The technology uploads retail point-of-sale (POS) data on a nightly basis, creating granular, store/item-level demand forecasts, shipment plans and projected inventory levels. Flowcasting aggregates those shipment plans into retail distribution demands using a dependent demand calculation.
The same process is applied to the retail distribution center, which in turn creates the demand on the next level in the supply chain. The concept of dependent demand is new to retailers but has been tested and proven in manufacturing for over 30 years and is central to both DRP and manufacturing resource planning (MRP) systems. Basically, a dependent demand is the mechanism for integrating the supply chain.
Rather than forecasting at each level (disconnected), the planned shipments at one level become the demand at the next level (an integrated supply chain). Not only is this more accurate, but it also eliminates the "bullwhip" effect and provides nearly instantaneous visibility up and down the supply chain. If a product sells more than expected at the stores today, manufacturers can see whether or not their existing production schedules will support their customers by the next morning. The data reside in one system, leveraged by both supplier and retailer.
Not only do these plans create an order of magnitude greater accuracy throughout the multi-enterprise supply chain, but for the first time, manufacturers and retailers are looking at the same supply chain.
From our perspective, Flowcasting will eventually replace the reorder point/execution systems that retailers rely on today and that manufacturers used some 30 years ago before planning systems like DRP appeared. What took retailers so long to adopt Flowcasting? Well, the sheer processing power to accommodate retailers' needs was just not available until recently. Data volumes in manufacturing are generally much smaller than they are for retail, where the number of product/location combinations can reach into the hundreds of millions. Traditional DRP systems were never built to handle these types of store-level data volumes. As a result, trying to take a platform designed for a distribution center (DC) and using it for the massive data volumes at stores was unrealistic.
With Flowcasting, trading partners can aspire to fully integrate their supply chains from their retail stores all the way back to the factories. Moreover, this type of technology can handle the required several hundred million products/locations to allow planning a year into the future, both on today's hardware and at an economical price.
The vision for Flowcasting has been around for a long time. But interest is just now growing — not only because of the technological breakthroughs, but also because of its demonstrable store-level capabilities and business results.
Distribution resource planning (DRP) has been helping consumer packaged goods companies and other manufacturers with supply chain planning for decades. Every major manufacturer is using DRP, and the premiere supply chain planning vendors embed DRP into their products. DRP is the de facto industry standard.
Now the promise of DRP has reached the storefront, extending its capabilities across the entire supply chain. Called Flowcasting, it applies DRP concepts to the store and facilitates collaboration among manufacturers and retailers. The technology uploads retail point-of-sale (POS) data on a nightly basis, creating granular, store/item-level demand forecasts, shipment plans and projected inventory levels. Flowcasting aggregates those shipment plans into retail distribution demands using a dependent demand calculation.
The same process is applied to the retail distribution center, which in turn creates the demand on the next level in the supply chain. The concept of dependent demand is new to retailers but has been tested and proven in manufacturing for over 30 years and is central to both DRP and manufacturing resource planning (MRP) systems. Basically, a dependent demand is the mechanism for integrating the supply chain.
Rather than forecasting at each level (disconnected), the planned shipments at one level become the demand at the next level (an integrated supply chain). Not only is this more accurate, but it also eliminates the "bullwhip" effect and provides nearly instantaneous visibility up and down the supply chain. If a product sells more than expected at the stores today, manufacturers can see whether or not their existing production schedules will support their customers by the next morning. The data reside in one system, leveraged by both supplier and retailer.
Not only do these plans create an order of magnitude greater accuracy throughout the multi-enterprise supply chain, but for the first time, manufacturers and retailers are looking at the same supply chain.
From our perspective, Flowcasting will eventually replace the reorder point/execution systems that retailers rely on today and that manufacturers used some 30 years ago before planning systems like DRP appeared. What took retailers so long to adopt Flowcasting? Well, the sheer processing power to accommodate retailers' needs was just not available until recently. Data volumes in manufacturing are generally much smaller than they are for retail, where the number of product/location combinations can reach into the hundreds of millions. Traditional DRP systems were never built to handle these types of store-level data volumes. As a result, trying to take a platform designed for a distribution center (DC) and using it for the massive data volumes at stores was unrealistic.
With Flowcasting, trading partners can aspire to fully integrate their supply chains from their retail stores all the way back to the factories. Moreover, this type of technology can handle the required several hundred million products/locations to allow planning a year into the future, both on today's hardware and at an economical price.
The vision for Flowcasting has been around for a long time. But interest is just now growing — not only because of the technological breakthroughs, but also because of its demonstrable store-level capabilities and business results.
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