Collaborative Supply Chain

There are new and expanded demands in today’s retail supply chain to increase and improve the collaboration across all partners both internal and external.  Consumers are included in this increased and improved collaborative supply chain in a manner and depth that is creating new norm in the retail supply chain.  Most retailers have been interacting with consumers via a handful of tools, including product reviews and surveys covering shopping and purchasing experiences.  The more advanced retailers are engaging consumers directly in automated focus groups to collect opinions regarding product and lifestyle advertising.  While these are all productive and healthy steps in the right direction they must continue to expand collaboration with the consumers to engage in relationship shopping and sales to maintain their position in the marketplace.

As the collaborative relationship with customers grows and expands, the retailers will also need to expand their collaborative relationship with their other supply chain partners in order to react to the demands of the consumer.  As an example, expanding the relationship with customers will improve the demand forecasts and I expect this will then change the manner and cycle in which retailers purchase from their suppliers.  Then changes in the supply purchasing cycle will flow into changing requirements in transportation and shipping of products.  Shorter demand purchasing cycles that result from the refinement of demand planning will ripple across the extended supply chain and change the relationships and methods to support the demands.  

These changes can be a very positive thing and result in improved inventory management and placement along with a reduction in overstock inventory.  Improvements and the expansion of the consumer relationship and collaboration will allow retailers to gain insight into their customer demands at an earlier time in the cycle.  This will be especially supported by the increase in data available from the improved relationship along with the increase in eCommerce sales.  In the past retailers were basing their plans on the fashion developers’ tastes and new product development along with the actual sales of the products and similar products.  This was inaccurate and allowed for fluctuations in demand along with missed sales that were not realized.

eCommerce and online sites allow the retailer to capture all of this lost data for action because the provide the ability to capture the consumer shopping patterns when they are shopping on the site.  Retailers can determine the sequence of shopping and selection and these sequence patterns can then be turned into more accurate demand forecasts. So you can see how important it is for retailers to utilize every communication channel available across the supply chain to improve communications and collaboration.  All retailers now need to focus on relationship selling that is supported by the collaboration across all channels and partners.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Multi-Channel Inventory Management

Inventory management in the multi-channel retail marketplace can be difficult due to the changing demand from different channels and different geographic locations.  It requires dramatic changes from retailers to their purchasing procedures to support the consumer demands for purchasing.  The consumer shopping demands are blending channels and the consumer lifestyle is fueling these changes that are also driving changes to the consumer purchasing patterns and methods.  All of these changes are then fueled by mobile technologies and improvements in wireless networks to support the consumer shopping and purchasing demands.  All of these changes in consumer practices then drive changes in retail requirements to support these consumer practices.

These changes in consumer practices require that retailers blend their capabilities across channels to support direct to consumer shipments from all channels.  This simplifies the inventory planning to some degree because it blends the total inventory demand forecasting into a combination of inventory demands from all retail channels. It makes it more difficult in the manner in which the inventory is then consumed and the forecast to determine the channel.  From a simplistic approach though, the inventory planning and resulting consumption in this new retail multi-channel marketplace should result in lower overstock inventories and increased sales.  

There seems to be a disconnect though between the current reaity what I describe as an expected inventory forecasting and changes to the inventory management that would result in improvements to inventory management outcomes.  We are seeing instead what appears to be no change in the levels of overstock inventory, especially in the large legacy retailers and in fact the overstock inventory seems to be increasing in the case of one retailer.  This is where big data analysis comes into the picture to help retailers understand the changes to the flow of inventory by channel and by region to allow them to improve the inventory management to meet the consumer demands.  

A considerable challenge for retailers to enacting these changes is presented from both the business process, including culture, revisions requirements and the cost of technology upgrades required to implement forecasting and inventory management improvements along with the business process changes.  Blending the support of purchasing across all channels requires that all channels efficiently execute the particular processes across channels.  Bottom line the retail store must have the ability to ship customer orders using similar processes as a distribution center configured to ship orders to the consumer.  These changes to forecasting and inventory management require significant change to business process in addition to technology.  This means that the retailer must increase efficiencies and capabilities to fill customer orders shipped from the local store, along with improvements in inventory movements between stores and regions to support these demands.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Collaborative Inventory Planning

Inventory planning practices are driven to a much more fluid process due to the changes in consumer shopping and purchasing practices.  Planning and forecasting must take into account now the changing consumer shopping as well as purchasing practices to provide a model that can support the opportunistic purchasing practices that are increasing in volume and importance.  The integration of technology into the consumer practices is the single greatest challenge for retailers to overcome and these consumer changes are rippling through the marketplace and all practices supporting the marketplace.  Consumers are now practicing more fluid shopping and purchasing based on the technology and I feel that one of the greatest impacts is presented by mobile technology and wireless technologies.

The good news for retailers and the extended supply chain is that this increase in technology utilization provides a great opportunity for retailers to interact and collaborate directly with consumers.  The bad news for retailers is that this increase in technology utilization allows consumers to shop across multiple channels at the same time, allowing consumers to purchase any time from any channel.  This flexibility then increases the complexity of inventory planning and forecasting and this is driving additional disruption in the marketplace.  These consumer practices disrupt the forecasting and planning accuracy and this disruption of accuracy leads to increases in markdowns and on the flipside this also leads to lost sales when inventory is not available for purchase.

More than ever, everything is connected in the extended supply chain and as a result, inventory planning and forecasting must also take into account these connections and data available from these connections to improve the accuracy of the forecast.  This means that retailers must extend their collaborative relationships and include the data collected from these relationships to improve their planning and forecasting.  Technology is driving the opportunities for both collaboration and extensions to the sales channels and these opportunities must be taken into account when developing inventory plans and forecasts.  

The good news in this story for retailers is that technology is also available for retailers to increase their collaboration with consumers and then to maintain the information collected.  Big data capabilities provide the means for retailers to make this data collected actionable to improve their forecasts.  Consumers are investing in technology at greater levels and then using this technology to support their lifestyle changes and requirements.  Retailers must now also invest in technology and business process improvements to support the consumer changes.  This includes using technology and social networking tools to collaborate with consumers to improve their inventory planning and forecasting accuracy.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Collaborative Inventory Optimization

Inventory optimization requires in the current retail marketplace requires a robust supply chain management process that takes into account the extended supply chain partners, consumers and most importantly the velocity of changes in inventory demand.  In other words, inventory optimization requires the optimization of the entire supply chain in order to really be successful.  The supply chain optimization can be a daughnting task when viewed however when viewed in pieces and tasks that make up the whole it is much more manageable.  Supply chain optimization is a journey and not a destination and this requires continuous review and open collaboration with all partners, internal and external to be successful and most importantly it requires a level of flexibility to incorporate adjustments and refinements to the plan along the way.

Inventory optimization requires analysis of both forward inventory planning along with analysis and review of previous actions in order to improve.  This analysis does require a great deal of analysis along with a healthy dose of gambling on the potential.  In order to improve the chances of success you also need to collaborate with internal and external partners in your supply chain to improve reaction time and reduce the cycle of replenishment ordering in a global supply chain.  This is no small feat, as every retailer and especially apparel retailers know so well.  

I see the next phase of improvements in inventory optimization to require inclusion and a focus on consumers and collaboration with consumers to refine both the forward planning and the backward analysis.  Extending consumer collaboration into the inventory optimization analysis will produce 2 benefits for the effort;

1. It will increase the accuracy of the analysis by providing another viewpoint and perspective on the questions.  Interactive collaboration with consumers will provide a great deal of information and explanations regarding both the purchasing cycles and the product selection.  Interactive collaboration, or more simply conversations, with consumers will allow iterative discovery and improvements that the focus group or survey process cannot provide
2. Engaging consumers in this exercise will increase the retention and also encourage consumers to suggest friends and family to shop with the retailer.  The act of engaging the consumer will encourage the consumer to participate and the participation will then encourage the consumers to return and shop to explore how their interaction has changed the retailer’s offerings.

Optimization of any function requires an iterative process that involves every participate or consumer of the process and inventory should be viewed in the same way.  This is not just some idle experiment though, the success and longevity of the retailer depends on two things that are both impacted by inventory optimization, product supply, the desire of the consumer to purchase the product and adjusting to the consumer demand cycle.  I do not think that retailers can be successful in these objectives without a robust consumer collaboration practice.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Supply Chain Planning Cycles

In the current retail marketplace climate it is very difficult to accurately plan inventory demand and replenishment requirements across a large multi-channel chain.  This is because of both the velocity of changing consumer demands and the level of competition in the retail marketplace.  These changes in the marketplace and consumer demands are driving changes to the planning cycles and therefore changes across the entire extended supply chain and especially focused on inventory optimization.  The changes in the marketplace are causing upheaval in the planning cycle to support the inventory optimization requirements and this is driving new collaboration requirements to support shorter planning cycles.  These changes in the planning cycle ripple through the extended supply chain impacting relationships technology software and  processes along the way.

Technology software becomes even more important in this environment by supporting the ability to collect and sift through great amounts of data in planning and forecasting processes.  With a change in cycle duration it is even more important to incorporate robust analysis and planning software to support the velocity of changing demands in the required shortened cycle.  This is an important factor resulting from the changes driven by the consumer demands in the marketplace and I think it requires a strategic plan to both understand and then implement a strategic action plan to update the planning and forecasting cycles of the individual retailers.  

There must be a careful review of the changing marketplace demands and then the capabilities of the extended supply chain in order to fully define the business problem.  There are some key elements in the problem that must be included included in the analysis including the business problem, the future process and the the requirements of the future process.  With this information in hand the retailer can then collaborate with the extended supply chain and consumers to confirm the proposed process before starting the implementation process.  This can be a costly endeavor and must be fully understood in order to ensure the plan will produce the desired results.

The changes to the planning and forecasting cycles that must be implemented require technology improvements in order to support. The good news is that the technology is not new and especially not new to the sector.  This does, however, require rather dramatic changes to the process in order to support the new cycles.  In addition, although the technology is available to support the challenge, it does not mean that the technology has been implemented and utilized by retailers though and this is a large initiative to successfully implement.  

The technology solution should follow the business process review and revisions in order to understand and address the challenge.  This is critical and must not be addressed in the reverse order because that will ultimately not address the issues.  It is too easy to go down a path of a particular technology solution prior to fully defining the business problem and this results in a solution that does not solve the business problem.  

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Collaborative Planning

In the current retail marketplace it is very difficult for retailers to take into consideration the changing consumer demands without developing a collaborative relationship with consumers.  The velocity of change in the market is too great to risk a costly mistake in product procurement and there is no leeway to adjust and overcome a procurement mistake.  Since we have entered into this current retail market cycle of consumer control the product planning and forecasting along with the cycles of replenishment have accelerated in a dramatic manner and to top it off, the increase in competition, especially in the eCommerce channel, reduces the chances to recover even more.  Consumers though are open to engagement and interaction, if the retailer would only engage in a collaborative relationship, to provide their insight and guidance on products.

Planning and forecasting in the current market cycle requires shorter cycles and increased information to increase the accuracy and timeliness of replenishment cycles.  These cycles are also moving to a more immediate execution of replenishment in shorter cycles to allow the retailer to adjust to consumer demands and more importantly to adjust to consumer reactions to products.  This requires a great deal of compiled information regarding consumer shopping and purchasing along with the direct consumer input and collaboration so the retailer can better understand the product and replenishment needs.  This information regarding the product lifecycle also includes geographic product sales and shopping information that can allow the retailer to localize the sales and replenishment based on consumer demand.  For instance summer in the south, or winter in the north last much longer and large retailers should extend product offerings based on the local climate conditions.

These new shopping inventory replenishment patterns require both a great deal of information and a flexible supply chain to support the seasonal and geographic fluctuations.  This requires a great deal of planning and coordination to implement an inventory strategy that is flexible to support the needs across a disperse market and retail channels.  It requires the planning and coordination to move inventory between regions and channels to support the consumer shopping and purchasing demands.  All of this requires rather precise data on costs and benefits to support the demand requirements across regions and channels.  

The glue holding all of this together though is the improved collaborative relationship between consumers and the retailer.  The collaborative relationship provides retailers with the ability to quickly understand intent and direction of consumers so they can adjust their forecasts and planning models.  The critical benefit of the collaborative relationship is the speed of understanding and reaction to changing demands.  In this marketplace decision speed and accuracy makes the difference for adjusting to the consumer demands and increased sales.  It does of course require a long term investment in technology and people to succeed in this new marketplace and retailers do not have a choice in this matter.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Supply Chain Forecasting Granularity

It is very difficult to forecast with any granular accuracy the demand for a product in a channel over an entire season and retailers are basing their sales and survival on this forecast.  They take this forecast then to drive purchasing for the entire product line for the season.  This practice and method is now colliding with the changes in shopping and purchasing practices driven by the consumer in addition to the impact of smaller competition made possible now by eCommerce.  All of these demands and influences on the retailer only makes the planning and forecasting practice more important and, in turn, demands greater accuracy and a more granular level in their forecasts.  There is no easy way for retailers to take these factors into account to product a forecast that provides accuracy to make large season long purchases.  

I do not believe there is enough data that can be provided to a forecasting to increase the accuracy of the long term forecast at a level of granularity to purchase accurately.  Granted, the long term forecast can provide trends and tendencies but these must be continuously monitored and updated because of the velocity of consumer change.  To increase the level of difficulty, for the large retailers especially, there has been an explosion of competition for the commodity type products and consumer shopping and purchasing practices have become even more opportunistic as a result of the capabilities offered by mobile technologies. All of these factors have come together to increase the importance of forecast granularity while at the same time disrupting the ability of the large retailers to produce accurate long term forecasts.

There is the opportunity now though for retailers to increase the data collected to improve the forecasting.  The data collection and availability itself will not necessarily improve the accuracy of the forecast but it will provide input to improve the trending analysis and this is a critical aspect to produce a forecast at the appropriate level of granularity.  In addition to the collection of additional data retailers must collaborate with the consumer to understand the consumer demands and reduce reactionary changes that also disrupt the forecast.  

This requires a change in the practice to shorten the forecast and purchase cycles while increasing the types of data utilized for trending analysis.  This change in practice also requires a change in culture to open the planning and forecasting process to incorporate input from consumers.  This is the most important, and the most difficult change because culture requires a change throughout the organization and commitment from leadership.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Supply Chain Forecasting Accuracy

Forecast accuracy is probably at least one of the most difficult practices within the extended retail supply chain .  The seasonal planning generally practiced by the larger retailers is a very difficult target to meet because of the fluctuations from weather and consumer purchasing fluctuations.  The changes in the retail purchasing channels and consumer shopping and purchasing practice changes and demands have only added to the difficulty to plan and forecast accurately.  The results of the missed forecasts are easily evident in the retail outlets from the amount of markdowns which seems to be growing.  How can retailers overcome the challenges of changing consumer shopping and purchasing along with a quickening of the product change cycle?

In many ways retailers have brought these difficulties on themselves as a result of their changes to the seasons.  Christmas sales practically start in September now and are overrunning sales for Halloween and even Thanksgiving, it is barely July when back to school and fall products appear on the shelves.  These extensions of the key shopping holidays seem to be the result of the desire to support lagging current season sales with the next.  These practices though add to the level of overstock product that must be sold at reductions.  This cycle continues the spiral of increasing overstock that diminishes the retailers profits.  This cycle also makes it very difficult to plan and forecast for inventory to support the sales.

This is where the fast forward retailers enter the equation with a shorter cycle and continuously updated product to interest the consumer.  These retailers have identified and are continuously adjusting to the demands of the consumer with shorter product cycles and continuously turning inventory.  This gives the consumer a reason to regularly return for fresh product offerings and by the same token, the overstock is also liquidated on a more frequent cycle.  There are the same winners and losers in product sales and because the replenishment cycle is shorter there is a greater opportunity to weed out the slow selling product while the strong selling product can be replenished.  This shorter cycle may increase costs for both product manufacturing and transportation however there is a greater cost elimination for product overstock liquidation that I think offsets the increased costs.

There is another benefit to the shortened product life cycles and that is an increase in consumer interest and frequency of returns to the store and the eCommerce sites.  This alone is a powerful reason for retailers to revise their planning and forecasting cycles; it changes the consumer interest from checking for price reduction on product they wouldn’t pay full price to consumer interest for new products and willingness to pay full prices so they don’t miss out on the product.  One of the most difficult jobs for retailers is generating consumer interest to return frequently and this process of shorter product life cycles and ‘fast forward’ retailing is a great tool to help to generate interest and draw consumers to return.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Supply Chain Forecasting Strategy

The retail marketplace is changing at a breakneck velocity and this is leaving many retailers behind in their ability to meet the velocity of the changing demand.  The velocity of these changing demands requires retailers to change both their sales and inventory planning and forecasting strategies.  This is a very difficult proposition for the large legacy retailers because these same retailers have to change not only strategies but also the methods, culture and potentially software utilized in their planning and forecasting strategies.  These changes are inevitable however and cannot be put off any longer.  The marketplace continues to change and the velocity of change is only increasing as consumers continue to revise their shopping and purchasing habits is support of their changing lifestyles.

Consumers have already eliminated the separation between retail purchasing channels and retailers must not only eliminate this separation, they must also redesign their sales and purchasing strategies to eliminate the separation as well.  This presents both a challenge and an opportunity for the retailers to develop a collaborative relationship with consumers to redesign the strategies in a manner that provides direct input and guidance from consumers in addition to the direct purchasing and eCommerce shopping practices data that is required to support the planning and forecasting.  This consumer collaboration is a huge opportunity for retailers to understand and plan for the demands rather than simply react to the actual sales.  

This is a great challenge though for retailers not only because of the changes required to their planning and forecasting methods and procedures, it is also a challenge because of the change in culture that is required to also support these changes.  The large legacy retailers are comfortable in their reactive practices and have basically built their businesses around these practices.  Now consumers have changed their shopping and purchasing based on their own needs and have developed the capabilities to go around the normal retail practices of these large retailers to change the marketplace.  These changing demands require that these large legacy retailers change their culture, first and foremost, from a reactive to a collaborative practice in order to meet these changing demands and survive in this new marketplace.

Its a brave new world that requires dramatic planning and forecasting changes in both strategy and most probably technology.  Technology has provided consumers the opportunity to reinvent their shopping and purchasing practices and large legacy retailers must also use technology to support the required changes in sales and inventory planning and forecasting.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Supply Chain Forecasting Challenges

In the current retail environment it is very difficult to forecast long term inventory and even product plans and this is especially difficult in the apparel and electronics markets.  This requires a change in strategy and execution for both the demand planning and forecasting practices and this will be a boat anchor for retailers until they change their strategy.  The changes in the retail marketplace driven by consumer shopping and purchasing practices is not going to stabilize and in fact, changes in demand and forecasting will only increase with these marketplace changes.  These changing consumer demands must be met with a forecasting and planning strategy and methodology change that will depend a great deal on expanded data collection and analysis along with expanded interaction and collaboration with consumers.

Many planning and forecasting strategies are focused obtaining the lowest cost for product purchasing which drives a methodology for planning a season and purchasing large quantities of products to support the majority of the season.  This causes peaks and valleys in purchasing and then in fulfillment to stores and eCommerce where the beginning of the season sees high volumes of receipts and then the remainder of the season the flow shifts to outbound shipping.  This planning and forecasting strategy has helped retailers to increase their profits and reduce their costs in the legacy marketplace.  This strategy has also created a high incident of highs and lows in inventory availability; the unplanned high volume demand causes lost sales at full purchase price, while the overstock causes sales at mark down price losses.  

My observations of retail and especially stores identified a large volume of mark-down overstock product in stores, so much so that in some stores I’ve seen between a quarter and half the floor space dedicated to overstock product mark-downs and in some store they have dedicated a large department in the store for overstock.  It seems like the retail marketplace is entering a new phase of off-price sales of product in order to address the overstock issue.  This cuts into the profit margin and then it can set off a series of reactions to lower prices earlier to reduce the volume of out of season markdowns.

Large retailers can learn from the fast fashion apparel marketplace and shorten their cycle of planning and forecasting.  This would require a redesign of the extended supply chain and supply chain partner agreements in order to change the planning and forecasting strategy however I do not think this is an insurmountable hurdle.  I think the greatest hurdle to changing demand planning and forecasting strategies and forecasting is the hesitancy to change by these large retailers.  The change would require re-thinking timelines, rethinking purchasing strategies and rethinking supplier partners in the extended supply chain and all of this means an increase in the continuous stream of effort required to support these new strategies, methods and partnership arrangements.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Supply Chain Forecasting Cycle

One of the greatest impacts on the retail marketplace of social commerce is the quickening of cycles of activity and the forecasting cycle may be one of the most significant impacts because of the far reaching impact to the marketplace.  Outside of the impact of an increase of millennials in the marketplace, I don’t know that these demands have changed much from previous consumer demands.  The changes in cycles now are the results of the availability of options made possible through eCommerce, mobile technology and the growth in throughput of the networks. These factors have all come together at a point and a time when consumers are flexing their muscles in experimentation with methods to support their shopping and purchasing demands.

The quickening of cycles is evident in demand planning and forecasting with the level of overstock seen in stores along with a flattening and even decrease in sales for legacy retailers through their brick and mortar channels.  Another symptom of the quickening cycles is delays and inability to adjust to spikes in sales on products.  These changes in the velocity of information can definitely be overcome through collaborative actions across the extended supply chain with revisions to data collection and analysis along with improvements in demand planning and forecasting software.

There are many challenges for retailers, and especially the large legacy retailers with a large investment and footprint in brick and mortar stores, that require increased spending to overcome.  There is also an increase in consumer interaction and collaboration, which also requires additional spend in internet and mobile technology to support along with an increase in labor to provide the personal interaction that consumers require.  These points require significant and long term change in culture along with significant increase in spending to address.  These investments require significant support from the senior leadership to allow the changes to be implemented and more importantly to allow for the time to adjust and build the relationships with consumers that will deliver results.

I believe that the greatest challenge to the large legacy retailers is increased consumer collaboration.  This collaboration is a requirement to help the retailer identify consumer demands and trends in a manner that allows them to quickly and efficiently adjust their demand forecasting and planning.   Improved consumer collaboration has the greatest investment in people and requires a commitment to a long term investment in people along with a culture change to be successful.  I believe the most important point to this is that I do not believe that demand planning and forecast can be successful without a focus on consumer collaboration in order to understand and gain an edge and confirmation on changes in consumer demands.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Social Supply Chain Forecasting

Inventory optimization is the key objective of the combination of forecasting and planning and the social commerce marketplace has dramatically changed both the priority and the practice of these activities.  The key change that must be incorporated is the velocity of changing demand and the impact on the forecasting window that is manifested with the new social commerce demands.  Social commerce has dramatically changed the retail marketplace and there are many factors driving these changes especially the impact of the fast fashion and the speed of changing demands across the marketplace driven by the expansion of eCommerce shopping and sales.  The changing demands of the marketplace must be incorporated just as quickly in the demand forecasting and planning models of retailers.  

Fast forward retailers have especially impacted the retail marketplace with their changes in the velocity of product change.  This has in reality coincided with the consumer demand changes in the retail marketplace and the fast forward retailers success has been related to their forecasting and demand planning practices, especially their increased change cycles of demand planning.  This is a practice that is important to all retailers in order to maintain their success.  The velocity of demand change is different in some market segments than others, for instance I don’t think the home appliance market changes at the same rate as the mobile phone market for instance. I don’t know if the fast forward apparel retailer recognized the change and revised their forecasting and demand planning practices but I do think that they recognized that consumers were changing their shopping and purchasing methods and practices and they are trying to meet these new consumer demands.

The key consumer change that is making the largest impact in forecasting and planning is the change in shopping and purchasing practices that has been brought about by the combination of eCommerce and the increase in millennial consumers in the marketplace.  The cycle velocity of shopping and purchasing has been changing over the last 10 years and the increase in millennial consumers has finally pushed the practices to the tipping point where the changes to the marketplace is driving dramatic changes across the retailers.  I think we  are seeing changes in the marketplace now driven by the retailer inability to forecast and plan at the velocity that is demanded by consumers as a result of their changing lifestyles.

Unfortunately for the large legacy retailers the marketplace changes require a large investment of money and resource focus and skills in order to react appropriately to the changing consumer demands.  Retailers that are impacted the most are the legacy department store and large chain retailers that have a heavy investment in brick and mortar real estate.  The marketplace though will not allow retailers to delay or ignore these changes in forecasting and demand requirements and retailers must invest or die.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Social Supply Chain Planning

Retail demand planning is a very difficult activity in the current tumultuous marketplace because of the velocity of change in consumer demand and the length of the extended supply chain.  Forecasting and inventory planning takes on new importance in this marketplace to support the velocity of change.  Consumers have used the social networks along with the omni-channel tools and capabilities to take control of their shopping and purchasing to support their changing lifestyles.  The key point to successful demand planning is understanding the consumer lifestyle demands and this requires a very flexible and also robust forecasting and inventory planning and management practices in order to react to the velocity of changing consumer demands. This supply planning must be a focus of the retailers now in order to support the changing marketplace and survive.

For a long time the retail supply chain was developed and focused on cost containment and this, in turn, drove a focus on obtaining the most advantageous price in order to support the low cost strategy and maintain a level of profit.  This focus on price required purchasing large amounts for the entire season in order to command a low price to support their strategy to create consumer interest, traffic in the stores and sales based on low prices.  This focus on the season demanded a long range forecast horizon that in itself created a level of risk in the forecast and the supply demand.  This in turn creates a risk for a higher level of overstock inventory that must be addressed through price reductions.  This created a downward spiral that taught many consumers to delay purchases until the end of the season when they know the product pricing would be dramatically reduced to make room for the next season product.  

This is a negative cycle that drives additional costs in the retail demand supply chain that overshadows the original low cost purchase thereby negating the low price strategy.  These new cost pressures drive a requirement to improve the demand planning and forecasting to address the overstock risk.  This new pressure on demand planning requires a shorter planning horizon in very large part due to the velocity of change driven by consumers and the social commerce marketplace.  This shortening of the demand forecast time period allows the forecast to be more accurate, however this shortened time period requires a shift in the supply chain to reduce the buy quantity and then find new and near shore supply chain partners that can complete quick turnaround purchases.  Another option to the shortened supply cycle would be air shipments of smaller quantities.  

Social supply chain planning needs to change dramatically as a result of the changing retail marketplace.  These changes though are dependent on retailers changing their practices and more importantly their supply chain to support the shortened cycle and flow.  These changes will increase inventory efficiency and which in turn should recoup some of the additional costs related to supporting the changing supply chain demands.  The good news is that technology improvements can support these changing demands more efficiently than ever, the bad new is that it will require retailers to spend on the new technologies.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Planning Collaboration

Supply planning can be a very difficult process requiring a great deal of information in order to increase the accuracy of the plan.  Planning collaboration increases the accuracy of the plan by obtaining and including information from your partners across the supply chain. Retailers can increase their supply planning accuracy by including consumers in the planning process to help to determine demand.  Supply planning is very important to the success of an organization and especially retailers and this planning is just getting more complicated on a daily basis.  Miss planning can have a huge impact and considering the speed of business these days the difficulty with a planning failure is the ability to recover.  There is now less time to recover from a missed plan and this requires a great deal of information, and in the case of retailers on key factor to success in planning is the level of collaboration for consumers.

There is a great deal of uncertainty in the retail industry these days due to the velocity and amount of change driven by consumers.  These changes are not random and in addition, these changes are building on each other along the way as consumers experiment.  This uncertainty places a great of pressure on the retailer to incorporate the changes in their interaction and relationship with the consumer.  This level of change also places a great deal of pressure on supply planning activities to adjust to the changing environment.  

These changes and the impact of these changes to the supply planning capabilities are not insurmountable however they do require a level of planning and collaboration that has not been previously required.  Data is required to be successful in supply planning, market data, product data and sales data are all key aspects to the planning and this planning cannot simply change direction on a whim due to the time between planning and delivery in today’s extended supply chain.  This is why it is so important to include as much data as possible in the planning process.  

The retail marketplace can learn a great deal and improve the planning process by evaluating and implementing supply planning practices of the fast forward fashion retailers.  Consumer collaboration provides a method to obtain critical early information to use in guiding the supply planning process.  Then the increase in velocity that bleeds in the supply planning process can be understood and incorporated earlier in the process to support the velocity of change.  It seems to me that the key challenge to the retail marketplace and supply planning is the ability to quickly and effectively incorporate information in the planning process.  This also requires shortening the cycle of the supply chain and delivering less in a more frequent basis to allow the changes in the marketplace to be quickly implemented.  

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Collaboration Networks

Networks supporting and encouraging collaboration have been growing in importance and reach for years now and the expansion and growth of millennials in the retail marketplace has increased the use and importance of these networks.  The only real surprise, in my opinion, is that retailers have not prepared for changes resulting from the growth of these networks.  In hindsight it seems clear to me that the marketplace and these networks utilization have been waiting for a tipping point and this tipping point came with the growth of the millennial generation in the marketplace.  Over the last couple of years the growth and expansion in use of these collaboration networks has allowed consumers to turn the tables on retailers and take control of their shopping and purchasing practices to support their changing lifestyles.

The success, or failure, of retailers is now dependant on their ability and commitment to re-align their focus and support to embrace the consumer collaboration changes.  These consumer collaboration changes also drive changes in the retail supply chain that will ripple through the supply chain in ways that can be difficult to understand and requires quick reaction time to adjust the flow and direction of inventory.  The changes driven by consumers require integration throughout the supply chain in orders to meet the demands.  

Currently the retail supply chain is based on a simple and straight forward level of collaboration and partnership that supports the legacy requirements of the retail marketplace.  The retail marketplace is now in upheaval and this will also dramatically change the supply chain relationships and interactions.  The also requires retailers to change their planning and forecasting process to implement a much shorter cycle time which will drive the disruptions into their forecasting and planning models.  These changes to the entire supply chain collaboration model require focus and support from the senior leadership across the entire supply chain and will bring the supply chain partners even closer in this collaborative relationship.

Wal Mart and Amazon may be the two retailers best prepared and most committed to meeting these types of changes because the supply chain capabilities and focus are ingrained into the DNA of these companies.  Wal Mart is probably best at process and supply chain integration while Amazon is best at imagination and acceptance of risk and potential failure.  Both of these cultures will do well in this upheaval for different reasons, Wal Mart for stamina and focus on process and integration while Amazon will drive the disruption with imagination and willingness to accept risk and potential failure.  Other major retailers will simply follow their lead which which only increase the number of failures during this period.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?