How to Flex Up and
Down to Keep Pace with Unpredictable Demand
Say
you’re a retailer selling skiwear or summer goods, a wholesaler supplying party
stores with Halloween costumes or one of the thousands of retailers who hitch
their revenue dreams to a booming holiday season. Like any business where
revenue-generating opportunities are tied to a specific season, keeping up with
surges in demand can make or break the bottom line. As a result, it’s critical
to ensure that your supply chain can get those products to market at the right
time, in the right quantity and at the right price.
When
it comes to seasonal supply chains, that’s often easier said than done. Any
number of issues can get in the way of progress. Problems run the gamut from
challenges with suppliers to economic and geopolitical events, infrastructure
challenges and poor planning.
So
what’s the secret to optimizing your supply chain to meet high levels of demand
in short windows? The truth is, there isn’t just one secret. Here are four
critical success factors to consider when constructing a smart seasonal supply
chain. Let’s take a look:
1.
Understand how your customers prefer to conduct business.
Know
your customers. Find out how they want products
delivered to them and their preferred terms of purchase. The answer will drive
your supply chain decisions and supply
chain processes.
Does
your customer want to take delivery at the origin port of export, destination
port of entry or at a door delivery location? Is your customer a vertically
integrated retailer for whom you handle sourcing and distribution? That
customer may want you to manage the product from source to the shelf. Are you a wholesaler selling
to retailers? What are your customer’s core competencies and how are you
providing products which align with their strengths?
Different
retailers have different needs. For example, Retailer A may want the most
aggressive cost and take ownership at the point of origin or take ownership
early in the supply chain and assume the lion’s share of the risk. Retailer
B wants you to take care of everything
from procuring goods, managing supplier
relationships to handling customs clearance, duties, air freight or steamship
forwarding and truck delivery to the door. Ether way, the first step to a smart
seasonal supply chain is knowing how your customers want to buy and structuring
terms to meet those specific needs.
2.
Forecasting and planning for seasonal demand
Just
as it’s critical to understand how your customers want to purchase, you have to
be able to forecast demand so that you have the right product in the right
quantity at the right time. There are
different ways to predict demand. Some companies leverage historical information. Others analyze recent
purchasing trends, market trends and what’s going on in the industry to create
projections. Whatever your systems of
record are along with the tools used to forecast demand, consider these
questions when sizing up demand:
What type of products are you selling?
What type of customers are you selling to?
How far in advance can you/should you
finalize the planning and forecasting process?
Do
supplier minimum order quantities impact your planning horizon?
What will you do if demand outstrips your
forecast? Replenish as inventory sells out or order enough buffer inventory to
ensure you can meet unplanned demand?
Your
next challenge is providing trading partners with accurate demand data so that
they can meet production capacities and
required delivery deadlines. Depending on your product and customers,
that might mean placing orders three,
four, five or even six months out. Instead of dealing with seasonality variance
when it’s too late, developing an effective strategy to demand planning is critical.
3.
Determine how your upstream
visibility into orders and
suppliers occurs
You’ve
established how your customers want to take delivery of product. You’ve sized
up demand and provided a production plan
to suppliers. Now, you’ll want to determine how much visibility you need
to track, divert or reallocate inventory to minimize supply chain disruptions.
Prior to order placement, consider these factors:
The
level of collaboration you have with your suppliers on production activities: do you have the ability to see upstream
production activities via an order or PO management system? Are you
notified during the production process
of critical milestones that can impact finished goods shortages? What immediate
steps can you take to avoid major disruptions in the supply channel?
How complex are the products you are
producing? Are they highly engineered that require long lead times or are they
commoditized products that can be produced relatively quickly?
Sourcing
Methodology: are you single-sourcing or sourcing finished goods from multiple
suppliers? Advance lead time: if you
don’t order enough of a product that has special holiday packaging, how will
you be able to meet a quick re-order process?
The
point is, if your supply chain provides visibility into all of these factors,
and you do your homework – creating hypothetical scenarios, factoring
statistical deviations into orders, making sure you have trained people at the
point of origin and destination, implement sound processes, have service level
agreements, and utilize enabling technology (P.O. or order management systems)
you’re in a position to make contingency plans.
4.
Make sure you control the process instead of the process controlling you
If
you understand the nuances of your customers’ businesses, have multiple supply
chain solutions in place and an order management system that supports different
suppliers, provides timely business intelligence and aligns production
information with customers, you can adapt to unexpected changes more
efficiently.
Say
you place an order four to six months out. You have a high level of visibility
that includes a critical milestone path with suppliers and timely updates
across discrete events in the production process. You discover there’s a
problem with the order. Now, you can notify your customer six to eight weeks
out that you can’t meet the deliverable quantity or time frame. You can agree
to deliver a partial order and minimize disruptions to your customer’s supply
chain. By better managing expectations, you’ll improve customer relationships
and prevent small problems from turning into deal-breakers. Bottom line?
With information, people, processes and
technology – you control the process instead of the process controlling you.
Is
your business driven by seasonal demand? Can your supply chain flex to support
seasonal surges in demand? Are you equipped to deal with seasonality
challenges? Do you have visibility into the supply chain and a good P.O.
management or order management system in place?
To
learn more about how to structure, build and manage a smart seasonal supply
chain when there are multiple suppliers involved, download a PDF of a
question-and-answer session done with Chain Store Age magazine on the
challenges of managing a multi-source retail supply chain.
http://blog.ryder.com/2013/07/managing-seasonal-supply-chain/