A little over 10 years ago I was on a project to help one of Canada's largest grocery and general merchandise retailers design and implement new planning processes and technology. My role was the co-lead of the Integrated Planning, forecasting & Replenishment Team and, shockingly, we ended up with a flowcasting-like design.
The company was engaged in a massive supply chain transformation and the planning component was only one piece of the puzzle. As a result of this, one of the world's preeminent consulting firms, Accenture, was retained to help oversee and guide the entire program.
One of the partners leading the transformation was a chap named Gary. Gary was a sports lover, a really decent person, great communicator and good listener. He also had a number of “southern sayings” – nuggets of wisdom gleaned from growing up in the southern United States.
One of his saying's that's always stuck with me is his question, “is the juice worth the squeeze?”, alluding to the fact that sometimes the result is not worth the effort.
I can remember the exact situation when this comment first surfaced. We were trying to help him understand that even for slow and very slow selling items, creating a long term forecast by item/store was not only worth the squeeze, but also critical. As loyal and devoted Flowcasting disciples know this is needed for planning completeness and to be able to provide a valid simulation of reality and work to a single set of numbers – two fundamental principles of Flowcasting.
The good news was that our colleague did eventually listen to us and understood that the squeeze was not too onerous and today, this client is planning and using Flowcasting – for all items, regardless of sales velocity.
But Gary's question is an instructive one and one that I've been pondering quite a bit recently, particularly with respect to demand planning. Let me explain.
The progress that's been made by leading technology vendors in forecasting by item/store has been impressive. The leading solutions essentially utilize a unified model/approach (sometimes based on ai/ML, and in other cases not), essentially allowing demand planners to largely take their hands off the wheel in terms of generating a baseline forecast.
The implications of this are significant as it allows the work of demand planning to be more focused and value added – that is, instead of learning and tuning forecasting models, they are working with Merchants and Leaders to develop and implement programs and strategies to drive sales and customer loyalty.
But, I think, perhaps we might be reaching the point where we're too consumed with trying to squeeze the same orange.
My point is how much better, or more accurate, can you make an item/store forecast when most retailers' assortments have 60%+ items selling less than 26 units per year, by item/store? It's a diminishing return for sure.
Delivering exceptional levels of daily in-stock and inventory performance is not solely governed by the forecast. Integrating and seamlessly connecting the supply chain from the item/store forecast to factory is, at this stage, I believe, even more crucial.
Of course, I'm talking about the seamless integration of arrival-based, time-phased, planned shipments from consumption to supply, and updated daily (or even in real time if needed) based on the latest sales and inventory information. This allows all partners in the supply chain to work to a single set of numbers and provides the foundation to make meaningful and impactful improvements in lead times and ordering parameters that impede product flow.
The leading solutions and enabling processes need to produce a decent and reasonable forecast, but that's not what's going to make a difference, in my opinion. The big difference, now, will be in planning flexibility and agility – for example, how early and easily supply issues can be surfaced and resolved and/or demand re-mapped to supply.
You and your team can work hard on trying to squeeze an extra 1-3% in terms of forecast accuracy. You could also work to ensure planning flexibility and agility. Or you could work hard on both.
It's a bit like trying to get great orange juice. To get the best juice, you need to squeeze the right oranges.
Which ones are you squeezing?