40 Years of Wrong-headed Thinking

Dan Gilmore, in his excellent work with Digest, recently presented research that chronicles 40 years of research and measurements on out-of-stocks in the supply chain.  Despite $billions spend during this time, there has been NO progress.  Here’s a respose to this research from a pioneer in supply chain planning, someone who just might have the answer…

Dan,

The Out-of-Stocks problem in the CPG Industry has been around a very long time and will not go away until we completely change our thinking on how to manage the end to end retail supply chain.

First, we need to acknowledge some basic truths learned the hard way:

  1. The retail store is the beginning & the end of the retail supply chain. It’s the beginning of information flow and the end of product delivery.
  2. Every CPG retail is actually two supply chains.Today, the information is broken as every retail node making up the retail is disconnected from the manufacturer’s nodes and each node is buffered with thus slowing down the ability to respond to true store demand changes.
    1. The physical : the movement of materials & products from supplier to manufacturer to retailer.
    2. The information : the movement of consumer demand information from retailer to manufacturer to material supplier.
  3. Having wrapped our brains around these basic truths we then need to take advantage of major breakthroughs that have occurred recently.

Today, it is possible for a retailer and a manufacturer to model and connect their  retail inside a single computer and drive it, end to end, from a unique store level sales forecast.

Today, it is possible  to  resynchronize every node making up a  retail supply chain  every day based on changes in store level  consumer demand and thus completely eliminate the “Forrester Effect” (also called the Bullwhip Effect).

Today, it is possible for a retailer and a manufacturer to use this model of their retail supply chain and manage it as if one company were managing it.

Today, it is possible for a retailer and a manufacturer, using this “business model”, to create an Integrated Business Plan, identify gaps and take corrective action while there is still time.

Today, there are no secrets anymore on how to manage the end to end retail supply chain, from the store to the factory, and significantly lower store out-of-stocks as well as reduce retailer’s and supplier’s inventories and operating cost at the same time. 

Today, it is possible to achieve a 99.8%  On Shelf Availability (OSA) at the store while reducing overall supply chain buffers at the same time.

Today, there is a proven and well documented business process, and enabling technology, to actualise all of the above and it even has a name: It’s called the Retail Supply Chain

André Martin

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