The People Speak!/Flickr

Bad habits in retail supply chain planning

The People Speak!/Flickr
The People Speak!/Flickr

Friedrich Nietsche said “Most bad habits are tools to help us through life.”

This is especially true in the world of retail supply chain planning. When retailers embark upon implementing time-phased planning, it is tempting – from a change management standpoint – to tell people “this isn’t much different than what we do today” or “we’re essentially doing the same thing in a different way”.

While this is partially true at the 10,000 foot level, the things that are different are fundamentally different.

This month, we’ll explore a bad planning habit that is particularly insidious, because it is often treated as best practice in a non-Flowcasting world: Using the forecast as a “joystick” to control product flow.

There comes a time in every retailer’s life when product must flow further in advance of customer demand than desired, such as for capacity blowing seasonal peaks, planogram resets or promotional display setups.

In a reorder point world, there is little means to plan these types of things in advance. Replenishment rules such as safety stock apply “right now”, making it exceedingly difficult to do a lot of advance preparation in the system. This leaves 2 options:

Plan all of your safety stock updates in advance and use an Outlook reminder to update the values at just the right time to trigger orders when you want them to arrive.
Spend hours creating manual orders/transfer requests with the future ship dates you want – and pray that things don’t change a lot in the meantime that will require you to change those dates/quantities as it gets closer to execution time.
Neither very good options to be sure.

But wait!

There is a third option. By putting an artificial spike in the forecast at around the time you want product to arrive at various locations, you can ‘trick’ the system into flowing product when you want, but also take advantage of changing inventory levels right up until the lead time fence, thereby letting the ordering happen automatically.

To some extent, this makes sense in a reorder point world. Often, it can be the only efficient and automatic way to control flow. And it doesn’t do too much damage, because the forecast really only exists to trigger an order for an item at a location.

So what would happen if this approach was applied in a Flowcasting world. Not much: just unstable plans, incorrect capacity and financial projections and general chaos within operations and the vendor community.

That’s because, with Flowcasting, the sales forecast doesn’t merely drive ordering for an item at a location. It drives replenishment across all locations in the supply chain simultaneously. It drives capacity planning for the DCs and transportation department. It drives labour planning at the stores. It drives revenue, purchasing and inventory projections within the merchandising teams and finance.

Simply put, the forecast must always be representative of how much you expect to sell, where you expect to sell it and when you expect to sell it. And with the visibility afforded by a reasonable sales forecast, many options become available for controlling the flow of goods as necessary.

In other words, once you make the leap to Flowcasting, the bad habit of using your forecast as a ‘joystick’ to control replenishment is no longer a ‘tool that helps you through life’ – rather, it is one of the quickest possible ways to make your life a living hell.

More Stuff

Demand Clarity was chosen from hundreds of vendors to be named “2015 Supply Chain Partner of the Year” by our client Princess Auto. They are a super-progressive Canadian retailer and early adopter of Flowcasting. Needless to say, we are tickled pink to receive such an honour.

Many of you have not heard of Princess Auto, but you will soon – trust me on that.

Many thanks to Mike and the Princess Auto team for all their hard work! Pictured below is Mike receiving the award from Princess Auto CEO Geoff Frodsham and VP of Supply Chain Ewen McIlraith:

Demand Clarity

Jeff Harrop and Mike Doherty are the founding partners of Demand Clarity Inc, which helps clients design and implement supply chain planning processes.They have worked with some of North America's largest retailers, distributors and CPG manufacturers. Together with Andre Martin they co-authored Flowcasting the Retail Supply Chain, a book that outlines a new approach for managing the retail supply chain (www.flowcastingbook.com).

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