Retail Acumen understand that the next piece in the supply chain puzzle, after the statisticians have done their work on the demand forecasting, is to work out exactly how stock should flow from suppliers into and around your business in order to enable the planned demand to be fulfilled whilst avoiding unnecessary over stock or out of stock situations.

Commonly termed inventory management, this essentially involves the creation or derivation of a weekly phased stock plan for each and every product at each and every stocking location. Most retailers these days operate some form of WSSI (weekly sales stock and intake plan) and it would be the stock and intake lines of most relevance to this process. Of course, with millions of sku location combinations in most retailers, this is more often than not done by supply chain planning tools.

Someone once said that stock replaces information in the supply chain - at Retail Acumen we believe that there a lot of truth in that statement, in particular with regard to safety stock. Information, and the ability to access it in a useable format, is critical to supply chain management decisions.

Pre-season when initial orders are placed the stock commitment would ordinarily be based on a bottom up rough-cut calculation of display stock plus X weeks forward cover, usually 2 weeks, as most retailers still run a minimum of weekly store replenishment and if a week fails there needs to be sufficient stock to carry forward to the next replenishment opportunity.

This initial order is effectively a 'set-up' order - and in many retailers display stock alone is a huge investment, the percentage of the total order which is to make up display usually dwarfs the meagre amount to cover 2 weeks of sales. Still, set-up is necessary and assuming your forecaster has pushed back on level of display requirement in relation to rate of sale and assortment decisions were taken for good reasons then there isn't much you can do about this.

The real important piece to consider is what happens next. To ask yourself how, even before sales come through, should stock be flowed into the DCs and out to the stores (or in the case of e-tail or home delivery only, to the customers). Add to that how much safety to add on to cover for uncertainty then without some information about forecast accuracy, supplier reliability, product lifecycle and relative importance of the product, stock levels could spiral out of control. This is the point about stock replacing information...

Planned inbound flow impacts all the actors in the supply chain from manufacturers to suppliers, logistics agents through to the retailers own DCs and stores. If flow plans are to work in the real world they need to be built up from the line level sku store demand plans and flushed back up through the supply chain from store level at the various aggregation points to enable a clear view of what will be pulled through the supply chain and how that impacts at each level upstream.

In essence a quality supply chain planning and management process would be able to look at all of the planned store replenishment quantities, inclusive of any store assortment changes or store space changes that impacted the replenishment calculation (to a min max, an order up to level or similar). Each store would usually be linked to a supplying DC and as such each store's planned replenishment quantity would become a planned demand on that DC. The sum of all those store demands gives a view of the overall DC demand. Yes, an element of safety would usually be added at this level of aggregation, but with good information that safety stock commitment can be statistically calculated, and variable, depending on such aspects as where the product is within its lifecycle. All of that in turn enables a view of what the demand from the supplier must be to service each of the DCs demand.

Out of all this summing up you can achieve a supply chain flow plan that is relevant to the sales pattern. It is what could be termed an 'unconstrained plan' as it is still rather more of an ideal than a realistic representation of how the supply chain would cope with the flow. What happens next would usually be termed 'constraint based planning'. In reality many suppliers may not be able to deliver to the plan proposed, and suddenly constraints begin to apply e.g. stock may need to be pulled forward to secure availability, or to avoid factory closures at certain times of year. In addition, if your business has a major peak at a particular time of year DCs and stores also may not be able to cope with the ideal flows. That's fine. The unconstrained plan is effectively your ideal, and your supply chain manager can work from that point to define the achievable, realistic constraint based plan, within know constraints such as DC capacity, throughput and open to buy (OTB) applied to it.

The benefit of the whole process based on the fact that you are now able to make informed trade-off decisions. This again is an area where information is key to your ability to deliver a quality outcome.

A demand driven supply chain can deliver significant benefits to the supply chain management process. A future view of your supply chain flow requirements can be achieved by utilising data from the core transactional systems such as which stores are associated to which DCs, the product or store replenishment frequency, any store assortment or space changes etc. Once you have this view you can really open up the dialogue with the suppliers and the internal physical supply chain / logistics colleagues to negotiate your way through any constraints, leading to the optimal result of reducing stock holding whilst increasing availability.

Retail Acumen has vast retail supply chain expertise and will be delighted to help you optimise your stock and supply chain flow. If you would like to find out more please do not hesitate to get in touch.