Store Integration & Rapid Replenishment
Retailers are challenged to be ever more responsive to consumer demand. Strategies, like customer-centricity and multi-channel convergence, put pressure on instore inventory, which then pressures the consumer goods supply chain to perform flawlessly. To meet customer requirements, integration is needed, not only of disparate IT applications, but also among multiple parties -- stores, corporate centers, third-party logistics providers and suppliers.
On November 28, 2006, executives from leading consumer goods (CG) firms convened at The Westin O'Hare in Rosemont, Ill., for the CGT Connects event, "Store Integration & Rapid Replenishment." There, bonded by a common desire to become stronger collaborators, they shared pain points and best practices for improving replenishment and out-of-stock rates.
Expert Opinion
In the opening session, Nikki Baird, principal analyst - B2C supply chain research, Forrester Research, pinpointed the challenges of retail execution and instore inventory.
In the opening session, Nikki Baird, principal analyst - B2C supply chain research, Forrester Research, pinpointed the challenges of retail execution and instore inventory.
Baird shared results from the "2006 Shared Strategy Study," conducted by Forrester Research and CGT. Study results show that collaboration with trading partners is a fact of life as the total level of collaboration increased from 2005 to 2006. However, activities don't match up to perceived value and the level of activity does not reflect process maturity. "The base capabilities are there, but the glue is lacking because trading partner connections are still at a low level, connections between execution and planning lack critical mass and third parties complicate the supply chain," says Baird.
Open Exchange
Following presentations from Baird and Richard Douglas, Sr. director, strategic business solutions, webMethods (see sidebar), a group of executives participated in a candid roundtable discussion. Here's a sneak peak into what was discussed:
Following presentations from Baird and Richard Douglas, Sr. director, strategic business solutions, webMethods (see sidebar), a group of executives participated in a candid roundtable discussion. Here's a sneak peak into what was discussed:
Retailers hold the power. When it comes to collaboration, retailer and manufacturer opinions are disconnected: Retailers think they are doing a great job while manufacturers think there just isn't enough collaborative spirit. Challenges such as the lack of a standard CPFR process and limited access to reliable store data (other than syndicated data) give manufacturers virtually no insight into the store-level activity of retail partners. For example, almost half of retailers surveyed for the "2006 Shared Strategy Study" are not sharing loyalty card data or market basket data and only 20 percent are doing regular sharing of consumer demographic data.
"A lot of retailers are reluctant to share valuable data resulting in our inability to build a forecast before even starting a collaborative relationship," explained one roundtable participant.
Collaborators or competitors.Abig concern among the CG community is the likelihood that today's retail collaborators can become tomorrow's competitors. For manufacturers, sharing new product innovations with retail partners becomes a double-edged sword. Not revealing product information with retailers can result in missed opportunities, while readily sharing can result in retailers opting not to carry your brand in favor of creating a similar private-label product.
The out-of-stock dilemma. According to IBM, while 75 percent of out-of-stocks (OOS) are retail issues -- mostly due to backroom visibility and backroom replenishment problems -- 31 percent of the time outof- stocks will lead to a lost sale for the manufacturer. The consumer goods execs in attendance agree that inefficient processes at retail directly conflict with what both sides are trying to avoid -- the loss of a sale. When RFID is brought up as a potential solution to the OOS dilemma, execs in attendance are unimpressed so far.
Meeting increased demand on short notice. Retailers are facing increasing pressure to reduce inventory, which pressures suppliers to be more responsive. During the roundtable discussion, attendees addressed their constant struggle to maintain a 98 percent service level for fill rates. Other suppliers discussed their struggle to complete product requirements and meet doubled forecasts on short notice. Without an equal collaborative relationship and visibility to key data, suppliers in today's world are simply preparing to react. CG