Taking the Consumer Goods to Retail Supply Chain to the Next Level

Are we finally real close to getting supply chain just right in consumer goods to retail sector?

This is an important question for not only CG manufacturers and retailers, but really for most of our supply chains, as virtually every company is connected to that value chain in some way, and so many of our broader supply chain themes and technologies have their roots in the consumer goods to retail sector.

There obviously has been significant improvement in almost every area of this important supply chain area over many years. And yet, the same basic set of issues (too much inventory, not enough collaboration, still too many stockouts, etc.) have seemed to persist.

Along the way, the industry has seen many initiatives: Efficient Consumer Response (ECR), Quick Response (sort of the ECR equivalent for the soft goods sector), Continuous Replenishment, Collaborative Planning, Forecasting and Replenishment (CPFR), RFID… I have probably missed one or two.

I think I would be far from the only one who would say while each of these industry programs has delivered benefits and moved the ball down the field, there was always the feeling that the potential had not quite been truly grasped. The same problems seemed to remain. In fact, if you look at the language from the documents describing these initiatives, often from the VICS organization now run by my friend Joe Andraski, you will see highly similar language over many years describing the industry challenges and opportunities from the latest program.

Why is this? Well, I don't have room here today to fully ponder that (would welcome your thoughts) other than to say change almost always takes longer than we expect, and that at the core of many of these initiatives was really the need for true collaboration, a hurdle the industry has never really surmounted, and maybe never will.

But the answer may be to replace collaboration with mathematics. Not completely, in truth, but to a significant degree.

I first started hearing Procter & Gamble talk about the "consumer-driven" supply chain and "building the supply chain from the shelf-back" almost a decade ago. From that thinking came AMR Research's (now part of Gartner) "Demand-Driven Supply Networks" (DDSN) paradigm in roughly the middle part of the last decade, and the industry has been moving, if slowly, down this path ever since.

In May, VICS delivered perhaps its most important initiative/document ever, what it calls a guideline on "The Ultimate Retail Supply Chain Machine: Connecting the Consumer to the Factory."

I am greatly, greatly summarizing here, but one core of this is taking traditional concepts and tools relative to Distribution Requirement Planning (DRP), which really were designed for replenishment to distribution centers, and moving that all the way to the store itself. Let actual consumer demand at the store truly drive the rest of the supply chain, all the way to the manufacturer's factories.

Hmmm… letting true consumer demand drive the supply chain. Who would have guessed?

 

Full article could be read at Supply Chain Digest.

Url: www.scdigest.com/ASSETS/FIRSTTHOUGHTS/12-06-29-1.php?cid=5983