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In a recent Wall Street Journal article, “September Sales May Foreshadow Holidays,” it is stated that stores are slashing inventories to avoid price cutting. Inventories are at an all time low. How will retailers and suppliers respond when demand changes?
Per the article “Retailers and analysts will be closely watching September sales reports due Thursday from key store chains for any sign they may need to adjust their already-gloomy holiday forecasts. ”
There is always a fine balance between meeting profitability targets and revenue. In the retail business, competition is fierce and retailers need to have the product ready to ship. With the current economic uncertainty, retailers are choosing to stock less with an expectation that they will be able to respond to the market demand when it improves. However they are faced with global supply chains, long lead times and there will be a capacity constraint on suppliers when the demand increases.
There are a number of approaches that retailers need to consider:
- Get closer to customer demand. Analyze point of sale data
- Analyze demand trends (units and $) by product, by region, by time
- Apply supply risk management strategies (minimize single sourcing, establish VMI hubs, standardize on components or materials across products, identify product configuration alternates)
- Have the ability to make the appropriate decisions regarding allocation (by region, customer segmentation)
- Perform contingency planning scenarios – adding capacity, alternate shipping methods
- Have the tools in place to remove the latency from the change in consumer demand through the supply chain to the individual manufacturer. Ensure that any change is communicated throughout your supply chain in minutes to hours, versus days or weeks.
History will not predict the future in consumer spending. Crystal balls won’t work either. Retailers will need to watch consumer demand patterns very closely and be ready to engage their supply chain at a moment’s notice. Collaboration will be required between the trading partners. In today’s economic climate, speed wins.
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Tags: Collaboration, Demand driven, Demand planning, Demand-supply balancing, Inventory, Supply chain management
Posted in Demand management
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Good article! Studies show that customers frustration with lack of product availability on a retailers shelf may prompt them to move to another retailer. I believe that what is needed is a robust, reliable, easy to use set of tools that is focused on eliminating stock-outs and phantom inventory as a way to increase customer satisfaction. Tools that provide this focus are available from a multitude of vendors, some of these tools are included as part of an ERP or MRP software suite. There are also point solutions that are focused specifically on providing POS and inventory information directly from retailers to suppliers and are focused on the elimination of stock-outs and correction of phantom inventory information. Some of these solutions are available as SaaS with a relatively small investment in training up front and charge a monthly fee based on usage. In some cases the maintenance of the SaaS is provided by the solution provider at no cost to the user. For information on an SaaS solution that provides information focused on improving the customer buying experience through better inventory management go to: http://www.biscompany.com