The Retailer’s Path to Flowcasting

 

Nobody trips over mountains. It is the small pebble that causes you to stumble. Pass all the pebbles in your path and you will find that you have crossed the mountain. – Unknown

holygrail

is quite a destination.

Every item in every store has a sales forecast. The rest of the planning problem utilizes a single set of numbers – from the point of sale to the point of manufacture – based on the expected sales at the shelf.

Future needs, equipment, manpower and financial projections are simple, intuitive expressions of the plan that gets created by item/store and in units. It’s like having data warehouse level of detail, except all the dates are in the future instead of the past.

At that final destination, the line drawn between retailers and suppliers becomes a porous membrane – the retailer becomes the selling arm of the supplier and the supplier becomes the manufacturing arm of the retailer. A common plan between them is used to detect trouble and opportunities in advance and to simulate various plans of attack to reshape the future before it arrives.

So how do we get there from where we are now?

For retailers, there’s a 4 step path to follow.

Step 1: Integrate Replenishment

All of the capabilities enabled by Flowcasting start with the most elemental level of planning: discrete items in specific stores by unit by day. The first step is to build a planning process within the organization that will create this primary information.

Even though this is the first step, it is by far the most involved for a retailer, as it often involves challenging many internal processes and relationships that have been used for decades.

However, it also delivers enormous benefits to a retailer in terms of improving and inventory productivity.

When the step of integrating replenishment is complete, the following things are true:

  • – Sales forecasts and replenishment plans exist and are recalculated daily for every item in every store – including the slowest of the
  • – The individual item/store replenishment plans are used to calculate replenishment needs for all DCs and vendors upstream with no additional beyond the sales forecasts that drive item/store replenishment.
  • – There is tight between Supply Chain and Merchandising/Operations when promotions, line transitions and store network changes are being planned. The output of these collaborations are expected impacts on future sales by item/store/week, which are reflected in the operational item/store replenishment plans and shared throughout the supply chain. If available, planogram data is used in the plans.
  • – Replenishment schedules (with planned ship dates) are shared with all suppliers for a minimum horizon of 6 months in weekly buckets with at least a weekly update frequency.
  • – All planned orders are released for execution with a single commit time – including orders for promotions and pipeline fills.

Step 2: Integrate Operations

Once projections of volume in units exist at and among all items in all locations, they can be expressed in other units of measure and aggregated to estimate the usage of non-inventory resources in the supply chain:

  • – Inbound volumes by location in cube, weight and number of receipts.
  • – Outbound volumes by location in cube, weight or picks.
  • – Storage requirements by location in cube or storage locations.
  • – Lane volumes between locations in cube, weight or pallets.
  • – Labour requirements by location by area for shipping, put-away and receiving (including the stores).

When the step of integrating operations is complete, the following things are true:

  •  -The Distribution and Transportation departments review the projections (translated into their language) weekly and identify exceptions when resources are expected to be over or under utilized.
  • – Plan their execution based solely on the due dates for every shipment or receipt.
  • – Exceptions are resolved by either:
    • – Reallocating resources or pre-planning additional capacity long before the product starts to move
    • – Collaborating with the Supply Chain Planning and/or Merchandising groups to change the plans for promotions or new product launches or co-ordinate the bypassing of nodes during high volume weeks (e.g. vendor direct-to-store in certain regions during peak weeks).

Step 3: Retail Sales & Operations Planning

After Steps 1 and 2 are complete, the building blocks are in place for Sales & Operations Planning () within the retail enterprise. S&OP has been the norm in manufacturing for decades, so best practices have been well documented and can easily be adapted to a retailer with the first two building blocks in place.

When a retailer has successfully adopted S&OP, the following things are true:

  • – Meetings are held monthly where all of the numbers developed during the first two steps are dollarized and compared to the annual business plan. The meeting is chaired by the CEO and there are seats at the table for the Merchandising, Supply Chain and Finance VPs. Attendance is not optional. The purpose of this meeting is to discuss and debate prior period results, future period projections and comparisons to the business plan.
  • – Gaps between the operational plans and the business plan (as well as strategies to close them) are cascaded downward throughout the organization to develop and implement changes to the operational plans. As the plans filter to the lower levels, these teams are also having their own “mini S&OP” meetings to discuss the same topics at a lower level of granularity.
  • – The operational plans (set by item/location/day in units) is directly tied to the retailer’s business plan.

Step 4: Joint Business Planning

With the first 3 steps complete, the retailer has “all of their ducks in a row” and is now in a position to bring their key trading partners into the fold. Unlike collaboration strategies of the past where retailers and suppliers try to compare and reconcile their independently created plans, we now have the ability to create a single plan which covers all activities the retailer and supplier perform together in order to get product into a customer’s hands.

When a retailer is successfully conducting JBP, the following things are true:

  • – S&OP style meetings are conducted at various levels of the organization with representation from key suppliers
  • – The retailer and all suppliers are using a single set of numbers in a common system for all of their planning activities. As a key trading partner sharing extremely valuable information, the supplier automatically removes the retailer’s planned shipments in their available to promise calculation – inventory for the retailer is protected.
  • – The competition is very worried.

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