The Infosys global supply chain management blog enables leaner supply chains through process and IT related interventions. Discuss the latest trends and solutions across the supply chain management landscape.

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January 30, 2010

Multi Channel Order Management Go Live: How early should you plan Cutover/Rollout?

Last month, I was in UK for one of our retail clients to conduct a short workshop to assess the impact on existing system landscape, as they plan to implement Sterling Commerce order management suite to replace legacy order management. Multi channel order management programs typically end up as highly integration intensive solutions.  In such a solution, cut over and the rollout planning tends to become complex.

During initial stages of the program, it is quite natural to start thinking about high level solution, integration architecture, project phases and execution approach for the implementation. The cutover and rollout planning end up taking backseat since implementation timeline could vary anywhere between 10 months – 24 months.  The implementation team tends to believe that there is enough time to plan application cut over and rollouts. Delaying solution rollout planning can prove to be very costly due to influencing factors such as 1) Parallel running of systems for longer period 2) Business risks in big bang rollouts 3) Operations and support team training implications 4) Data migration complexities 5) Master data and transaction data implications during cutover period 5) Architecting a solution that will work during transition period 6) Minimize throwaway integrations 7) Design changes directly influenced by the rollout approach and so on.  

I was pleasantly surprised to see this client dedicating almost 2 days of the workshop to discuss cutover and rollout planning! Few examples on order management cutover and rollout planning which I shared during this workshop are –

·         Soft Launch – In this approach, only a small subset of multi channel end customer get access to the system. For example, internal customers (employees of the retailers) are exposed to the system for first few weeks/months and then the full launch. Even though it is subset of the customer  base it would expose the large part of the order management solution and thereby reducing the risk before the full launch

·         Sales Channel– Certain specific order channel and fulfillment of such channel specific orders could be considered for initial cut over. For example corporate orders (B2B) could be considered for the first release of go live. Alternatively, .com could go live first and then catalog call center. However, order changes or customer service operations for the .com orders needs to be clearly defined in this approach.

·         Product line – Rollout planning can be such that certain product lines can flow through the new order management solution. New product lines are added over the rollout period. In this approach customer may receive multiple shipments when certain order lines flow through the new system.

·         Geo based- Customers based on some specific geo (can be zip code, county, area, state etc) can go live in phases. This way order sourcing and fulfillment happens in new system for certain low volume geo and then slowly scale up in volume.

·         Fulfillment Channel- Cutover can be also planned based on certain fulfillment channels. For example all drop ship orders can flow through the new order management during initial release. Later releases can include distribution center (on hand inventory fulfillment from DC), store fulfillment and order fulfillment based on incoming purchase orders (incoming future inventory)

The approach may differ on case to case basis and it could even be combination of above. I would always suggest clients to run “Solution Release Planning” as a separate “work-stream” in the program which closely works with the application implementation team. This way, solution development team has a constant imagination of cut over/rollout, throughout solution design and implementation.

January 29, 2010

Leveraging SRM techniques to build business teams

One of the key objectives in the existing challenging environments is to develop long-term, productive relationships with the internal customers who are stakeholders within the procurement business team. This is interesting observation and SRM techniques can help organizations in building strong relationship with internal customers through foothold strategies that leverage long term relationship.

Let us take a look at how these strategies can build a positive sense among internal customers to stride them towards excellence.
Let us take a look at the four arms of any SRM technique used in approaching customer relationship management.
Whenever we are formulating supplier relationship we should be keen to have the best of the lot and build the application across
Sourcing 2) Selecting 3) Developing and 4) Retaining to get into deeper insights lets observe these arms closely
Sourcing:  We need to identify internal customers whom we want to target to have the right kind of talent and diversity, internal customers would thrive for achievement hence recruitment is the key for the right choice. So right talent hunt needs to be done from the right source. This  process is very traditional, includes setting up talent search places where a snowballing program is designed with higher-level assignments than they would find at many other companies, I too believe that the world is flat so scaling the resources to have access to the upper levels of the organization immediately is the key. This provides them with a lot of early experience in leading and managing team.
Selecting: We need to create a strong first impression when a new customer arrives to the organization. This may be as simple as a charming welcome in their hotel entrance but it's a gesture to set the relationship off on the right foot.
The next step is a formal interview process, customers can be interviewed with various people throughout the day with different set of questions where they can be judged with elements of behavior  required in day to day life and communication and can be also assessed on their interest levels. This will help to ensure the most thorough investigation, as well as help in putting forward the company's best face.

Developing:  Investing a lot of time is the key in developing internal customers,

Make the customers understand philosophies on supply management and on how to conduct performance management and develop the network, Put every internal customer through   a very rigorous talent evaluation process where the top management gets involved to monitor the needs and the development of every customer and wherein the customer has development plans for the supply management organization as a whole. Part of this is "skill gap closure" involves identifying skills that may be missing in supply management. There is also a future skills process, which looks ahead to where the business wants to be in five years. From there the supply management organization determines where it needs to be in order to meet the needs of the business.
Retention:  One result of the comprehensive development process is that internal customers appreciate just how much time the company spends working with them and expressing interest in their future. In addition, the company can have quarterly business meetings where management talks about what is happening in the business in general. The organization can have a "career tiering" chart. This gives internal customers the opportunity to consider some other jobs, either within supply management, or elsewhere in the company.

As a result of a comprehensive program to source, select, develop and retain internal customers through SRM techniques a positive environment can be built for better efficiency.

SCOR -S Certification; a boon for students

Great news awaits students expecting to launch their careers in supply chain. The SCOR Scholar (SCOR-S) certification program has been launched by Supply Chain Council in 2010-2011. Designed for university students who do not yet possess significant on-the-job experience, SCOR-S certification will demonstrate a basic understanding of how to use the SCOR Framework for supply chain management. “The SCOR Scholar certification will be one of the only programs in the world that provides students professional certification of a methodology for managing supply chain performance,” says Caspar Hunsche, SCC Chief Technology Officer. “In addition to core supply chain management knowledge, SCOR-S certification will send a strong signal to potential employers of a student’s interest and ability to excel at a supply chain career.” A detailed training catalog can be downloaded from Supply Chain Council. Workshops include SCOR Framework, Implementation, Integration, Benchmarking, Performance based Logistics (PBL), Cost Modeling and Supply Chain Risk Management. In a way, such specialized training programs open thinking and real-world practice possibilities for students. Besides, such forums and certifications bring relationships with SCOR practitioners and teachers who meet and resolve practical supply chain challenges in their day to day operations. Let’s discuss the significance of the SCOR-R certification. Students can get an insight into supply chain basics and industry processes from experts. Understanding of SCOR benchmarks and process drivers by specific industries help align supply chain academic knowledge with indicators one must look for to realize business performance. Next, such certification helps students edge out competition when it comes to presenting themselves to prospective employers. Ability to relate to critical aspects causing a business constraints become clearer compared to trivial facts. Inter-relationships between various operational entities are key to finding a resolve to today’s supply chain problems. The SCOR-R experience will enable students to balance supply chain risks and rewards more effectively. This is just a few from the list of many benefits that students can gain from this certification from the Supply Chain Council. Well started is half done. This cannot be truer especially when it comes to beginning a career in an exciting profession of supply chain.

January 28, 2010

Automotive manufacturers of 2009: Numbers convey their Supply Chain behavior

So the “Report cards” of the automotive manufacturers in US are out!! There are contrasting realities and some startling facts!!!. Do the Japanese and American car manufacturers behave the same way in the face of recession? How do their manufacturing and supply chain strategies reflect on their overall performance? Are there any “dark horses” among the American manufacturers who would pose the biggest threats to the Japanese in future? Are there laggards among the Japanese who would have to face the threat of survival in future? The numbers convey their behavior!!

The numbers of 2009 which tell a story in US Automotive  market

Figure-1: The numbers of 2009 which tell a story in US Automotive market

As sales were slashed by an average 20% due to the plummeting consumer confidence and the tightened credit, most automotive manufacturers saw erosion of their capacities. Utilization which had reached 70% levels now declined to 30% levels for most manufacturers. The Capacity utilization changes for other Japanese manufacturers have reduced in the range of 20%. This is in line with the Japanese philosophy of evening out utilization so that there are no major roadblocks during capacity ramp-up or ramp-down. In contrast, the capacities of Chrysler and GM have been slashed by above 50%, which lead to instances of plant closure, huge layoffs and the like. This provides a behavioral difference between the Japanese and the American manufacturers. In this pack Ford is a startling contrast, which has only reduced capacities by 17% and is in league with the Japanese. Also to be noted is the trend of Nissan which is drifting away from the Japanese philosophy of being frugal on capacities.

In these times of excruciating pressure of sales dip, Hyundai has kept its flag aloft with an 8% growth in volumes. Corporate philosophy says it was due to sharp focus, but industry practitioners know that most it was driven from the 1,00,000 kms warranty sop they provided to their customers.

From the Inventory position, the drop in sales has driven the drastic decimation of the inventories by about 50%. A closer look at the Sales change and Inventory change rates show that Hyundai is away from the pack. This is the only manufacturer which has shown boldness to reduce inventory in the face of increase in sales. This is only possible when a manufacturer is able to device lean supply chain. This is possibly the major cause of profits displayed by Hyundai.  This does not in any way indicate that others who could not emulate Hyundai were non-profitable. It only demonstrates that the opportunity which Hyundai utilized to derive margins from a lean supply chain could not be used to that level by others.

Not trailing far behind Hyundai are the Japanese biggies Toyota and Honda which have shown discipline in large cuts in inventory against sales decline. This ratio is to the tune of 2.5. This is a core “Japanese behavior”. Even though Toyota had drifted away from its lean principles when it built up components inventory in the wake of supplier bankruptcies, but is has never left its lean principles when it comes to vehicle supply chain. A sharp contrast to this trend is observed with Nissan, which has shed inventories in a very conservative manner. Against a sales decline of about 20% in Honda and Toyota, they registered an inventory decline of 50%, but Nissan could only achieve a decrease of 35%. Nissan shows a ratio of 1.78 against average Japanese trend of 2.5. These ratios are shown in Figure-2.

Compare this with the trend of Chrysler (ratio of 1.39) and GM (ratio of 1.65). Whereas GM has been able to manage their inventories better than Chrysler, but they are far away from their Japanese stalwarts, Honda and Toyota. This is what I say is an “American behavior” in vehicle supply chain management. Nissan, being a Japanese manufacturer shows a more “American behavior” with conservative inventory declines against the sales decline. And for those who prefer eyeballing trends than getting into the mess of data crunching, this behavior is very well displayed when we plot the sales change% with Inventory DoS change% in Figure-2

The Correlation Trend of Sales decline and Inventory decline

Figure-2: The Correlation Trend of Sales decline and Inventory decline

Whereas Chrysler, Ford, GM and Nissan show similar movements, when this is compared with the trends of Honda and Toyota, there is a sharp change in alignment. This is similarity is accentuated by Correlation coefficient (r) calculations as shown in the Figure-2 above.  This coefficient denotes that if the values are positive and closes to 1, there is a very strong converging trend. The lower the value of the coefficient from 1, the weaker is the similarity of trend. So a value of r = 0.97 shows that with the decline in sales trend, these organizations (Chrysler, Ford, GM and Nissan) show similar rates of decline in their inventory DoS trend. The value of coefficient r = 0.61 means that when we club this group with the Group of Toyota and Honda, the value deteriorates, as the behavior of these two groups are different.

Just like Nissan has adopted an American behavior in supply chain, Ford shows a contrast and displays a close-to Japanese behavior in supply chain. Their ratio of 2.11 tells the difference.  

These figures bring out the basic cultural mind-shift among the American and Japanese manufacturers operating in US. The prudent capacity utilization and the lean supply chain philosophies are going to be the “Guru Mantra” for these manufacturers to survive in the US market. Ford has shown drift in the right direction and promises of bright future ahead. This is borne out by the fact that their present Executive Chairman Bill Ford Jr. is personally attached to make structural changes to make things happen. Chrysler and GM are still to settle with their new leadership. It will be interesting to watch how the new leadership of these two heritage carmakers are able to make path-breaking breakthroughs. And with this is a challenge to Nissan to re-invent their Japanese basics to continue “hold fort” in the US market.

...SAP SRM 7.0 is here to stay, available to Leverage your SRM footprint: “The Implementation: What's the sandwich filling? ” – Part 4

In my previous Blog, I discussed about the Roadmap and the project kick-off, in this blog I would like to elaborate on what we actually crafted, “As a Solution for Plan Driven Procurement” and also the future functionalities fitment into the procurement landscape.

 

The out of the box requirements were funneled into a “product backlog”, there were simply “zero” developments that were in scope, since we used BADi’s in SRM to actually work over the vanilla functionalities that needed to be customer business driven.
                                              
In the Plan Driven procurement implementation, we actually went ahead and configured the system to over-ride the base functionality of Extended Classic to make it behave like a Classic deployment.

The Plan Driven model process flow implemented is explained below in the figure.

Plan Driven model process flow

Typically, the Plan Driven process is crafted on the Extended Classic framework, so the Purchase requisition that is routed into SRM from ERP will have to be fulfilled from SRM.
This brought in 2 big challenges
1)      Make the Purchase Order Changeable in ECC, this doesn’t happen without implementing a BADI since the system pushes the PO as an ECDP SRM Purchase Order, we made this modifiable in the ECC side
“Ask me how; I’d be glad to explain”
2)      Contract Compliance : The SRM Central Contract No -> Replicated as a Backend Contract wasn’t possible out of the box since we made the Purchase Order Modifiable, we worked around this too
Finally, we crafted the process that brings benefit to the client via the Strategic Sourcing Process (RFx – Bidding) coupled with Downstream Contract Management to drive contract compliance specifically for Direct Materials that do not have a valid source of supply for a plant that needs it.
In the days to come, the MDM Catalog will replace most of the maverick procurement channels focusing to curb it through decentralization.
The future aim is model SAP E-Sourcing into the application landscape to drive the eSourcing / CLM Auctions from the SAP SRM sourcing cock-pit, since there is no standard integration of SAP E-Sourcing with SRM, this makes it more interesting and challenging.
The Sourcing team also wants to get greater control of the procurement processes to eliminate Sourcing and Procurement project management currently managed via disparate spreadsheets and emails and folders.
…we will empower them with the activation of the Category Management functionality in SAP E-Sourcing.
All in all, the entire Procurement Portfolio of the SAP SRM suite will be blessed with the Business Process cutting across each of these applications, diligently.
Lastly the process instrumentation which is the Business Application Monitoring coupled with BPM will sit on the entire process to give a greater control to the “Procurement Folks” to monitor the efficiencies.
…Soon, we will look into SRM Analytics as soon as we have enough water to wade in….
Let me know if you’ve implemented SRM PDP in a way we did, or have a more efficient experience in your approach, I’d be glad to connect.
…Tridip

 

January 27, 2010

The Pit Stop - An Agile Supply Chain

I had the opportunity to attend a seminar on "How to Gain Competitive Advantage with End to End Supply Chain Visibility" sponsored collectively by Sterling, Deloite and GS1 held at Oxfordshire, UK sometime in November last year.

Deloite presented how important it was to maintain focus on business operations, with a clear emphasis on working capital optimization.
GS1 (They design and implement global supply chain standards) delved on the need of standard based solutions that enable organizations to gain visiblity of specific assets and how this in turn is driving process improvement throught the entire supply chain.

Sterling demonstrated how leading companies are focussed on improving their supply chain execution, using real time inventory and better supplier information.

One of the presenters explained the concept of an agile supply chain with an interesting analogy. He took the example of a Pit stop, where parts need to be changed the moment the formula car enters it. There are generally 29 men at the pit stop, who have to replace the tyres, refuel the tank, tighten the bolts, carry out multiple status checks etc, etc., in just 7 secs. And you know what is their collective goal? To beat the competition, to better that 7 second timeline each time. To acheive this speed of service, it takes 12600 practice session by each pit stop personnel to achieve that 7 second deadline. The rate determination factor in this case is arrived by the time it takes to refuel the car, that's how they arrived at the 7 second timeline.

An Agile supply chain replicates the Pit stop model. If you are not able to deliver the right goods, to the right place at the right time, there are other competitors out there on the look out to replace you. Agility and visibility are the two key aspects that need to be given most importance while running your supply chain as they are crucial for business success and competitive advantage.

Decide where you integrate: MCO does not equal MCC!

It’s the beginning of the year and our campus here at Bangalore is abuzz with client visits, with sometimes the Bangalore campus alone hosting 4-5 client visits in a single day. Budgets are being cast, everyone is looking for the right drop box to put their IT dollars and wait for maximum magic for the amount spent. While I am not involved in a majority of these visits, there's one industry vertical where SCM practice consistently gets invited to present their point of view, viz., Retail. My reasoning for this is that there’s really no other industry where one encounters so many best-of-breed SCM packages strung together by each of these retailers in a collage uniquely their own.

Without a single exception, going to those meetings means playing bingo with the mother of all transformational thoughts in retail - MCC. One really cannot talk supply chain to a retail audience without starting off on Multi-Channel Commerce (MCC) within the first 10 seconds of the conversation. However, what happens afterwards many a time is a tangential leap into the glories of e-commerce, site building tools, content management, search & browse capability, elegant design of shopping carts, personalization, loyalty management...the works. Before you realize it, the world would have shifted inexorably to a discussion around web-channels and how to leverage them better.

Not for a moment am I discounting the importance of internet as a channel to increase your sales revenues. In fact, soon it may become your default channel, if not for actual buying, at least for making all the buying decisions. Thus, all the buzzwords that I liberally sprayed across above are all important and critical, but does that make it MCC? Well NO, not by a big mile. For years, retailers, large and small, have been running an online channel, a call center channel, a stores channel and other sundry channels (EDI-based, direct order transfers, long-term contracts, special orders for large/national accounts etc) as separate establishments which meet only at a financials level. I prefer to call this MCO or Multi-Channel Operations, rather than Multi-Channel Integration (MCI) which is the precursor to enabling true MCC. Running disparate channels and integrating them during financial consolidation for the purpose of reporting quarterly results is not the way MCI happens. On the contrary, MCI happens during supply chain design itself where we need to weigh the process flows among the gamut of functions enabling customer order fulfillment (order capture, sales order management, order fulfillment, inventory management, replenishment planning, purchase order management etc.) and then take calls on where one wants his/her MCI design to converge.

Using Sterling Commerce, we've enabled multiple retailers to have a single source of truth regarding orders at an order header/order line/unit quantity level, keeping track of whatever supply chain exceptions are important to each client. SterComm's Multi-Channel Fulfillment (MCF) solution can do this pretty well, but for retailers looking at further convergence, enabling global inventory visibility and having allocations based on this visibility is the next level of evolution (with SterComm itself or otherwise). Regardless of whether we have a single order management system consolidating/tracking the life cycle of orders captured from diverse sources, if inventory is still disparate, the efficiencies one realizes would still be only partial.  

I do agree that holistic views of inventory and its synchronization is easier said than done (all such discussions finally trace themselves back to the importance of master data management, at least at an item/customer level). However, if your back-end supply chain can deal with the complexity, the improvement in inventory turns across multiple holding points would be a significant benefit that merits taking this route. Further back in your supply chain, if one has the appetite for it, retailers can try some level of PO consolidation as well. Again, POs can come from multiple sources (starting with the replenishment POs spewed out by the demand planning system/s), but like we did with one distributor some time back, if parent-child linkages can be effectively established, we can trace each shopping cart SO all the way to the consolidated PO that goes to the supplier and keep the link intact until both the linked SO and PO are closed in their respective life cycles.

Each of these thoughts may merit more discussion and I would welcome your views. Meanwhile, if someone says they have an MCC strategy, do check back with them where exactly the channels are converging in the supply chain and what information is shared across them. Chances are that they're talking MCO and limiting convergence to their accounting books.

 

January 22, 2010

Being Lean in Supply chain

Well, this blog of mine is different in many ways, from the ones that I have posted so far. I am not going to write too much to describe this topic but I am more interested in knowing what you all know. I want to reach out to each one of you to know what you have seen in industry either as an operations guy or as a consultant. Even if you have not seen it being practiced in real life, I am sure you would have some serious opinion on this matter.

The topic is very simple and well-intuitive. My question is: Have you seen “lean principles” being practiced in supply chain in any industry (preferably consumer goods/discrete manufacturing). I know the term “lean” has been used or mis-used very often, but I am open to hear anything from you – just take a pick, think and find out instances from your experience, that you can bucket under being “lean in supply chain”. Do not just restrict yourself to manufacturing...

Let me give you one example: recently, I had a discussion with a Supply Chain Head of a leading consumer goods organization and they intend to implement a “pull based” system in their supply chain.

Consumer goods companies have been pioneers in supply chain and their performance in supply chain has been best-in-class by any standards. Traditionally, we have seen organizations especially, consumer goods, running a typical push model where sophisticated forecasting is done to predict demand, goods are manufactured and distributed to various POS locations as per the dispatch plan. The product is actually pushed down in supply chain and focus is to improve forecast accuracy because that really drives everything else.

On the contrary, here is this company that would like to implement “pull system” and do away with forecasting to the maximum possible extent. To me, this is one true example of being lean in supply chain. I have always seen companies focusing on improving traditional push model that I described, but I have never seen a “pull model” running anywhere and hence this blog…

Going back to my question to all of you:

Do you think such practices exist in companies (esp. consumer goods)? I don’t know any company implementing a pull methodology in supply chain (please provide examples other than Toyota)? How do you marry push and pull in the supply chain, and where does it exist? Where is the Customer decoupling point? What tools do you use? How do you drive this initiative – what are the critical success factors?

Please share your experiences and insights – looking forward to hear from this great group of supply chain leaders…

January 8, 2010

Supplier and Customer Collaboration

Over the last few years supplier collaboration is gaining prominence and lot of data sharing is happening with the suppliers helping them to plan their manufacturing capacity better. It has helped the suppliers meet the requirements and ensuring adequate inventory control. Supplier collaboration has become an important supply chain initiative across different industries and corporations have realized the benefits. Of late there seems to be surge in the supplier collaboration initiatives as organizations want to follow the example of others who have done it and have achieved significant benefits.

Organizations who have gone ahead with supplier collaborations- have not done so on the customer collaboration side (or the number of organizations who have done is far less- I am referring to non VMI scenarios)- sharing replenishment data with their customers.

Customer collaboration can be at a strategic level whereby an organization can work with its customers’ long term plans to develop new products & services, enhance its capacities and thereby ensuring strategic customer relevance. 

Customer collaboration can also be at an operational or tactical level wherein customer forecasts, promotions and short term demand signals can be used to recalibrate the supply responses providing better service levels, lead times and flexibility. 

In operational   customer collaboration it will be the vendor who will inform the customer of the supply quantity that needs to be delivered as against the order quantity- this will help in demand supply balancing keeping inventory levels low.  If we take a VMI scenario, the situation is different. The common issue in VMI is less transparency with respect to the SKU and quantity being replenished by the vendors- this is primarily because very few companies share the forecast data and leave it to the vendor to replenish the SKUs based on the inventory position at the time of delivery- may be because they do not forecast for VMI items.

Customer collaboration would help in fine tuning the VMI process – for VMI to be effective, the retailer should share its SKU level forecasts for the VMI items with the CPG manufacturer and the manufacturer can share the data in terms of what will be replenished in the next delivery schedule. This will help smoothen the process and the customer can plan appropriately for the SKUs being delivered with respect to promotions, space management and warehouse management.

However the customer collaboration has still not caught up- as much as it is being done on the supplier side.

Probable reasons would be that organizations are not tuned to tell their customers

what quantity they would deliver which would help customers ensure proper inventory control- this would be possible if they look at the ordering pattern from their customer. It is still working based on an order from the customer about the quantity based on their business plan and the supplier supplying that quantity.

Having both supplier and customer collaboration would ensure that the extended enterprise works in a real partnership model and that there is free flow of information which will help in effective decision making and inventory control and cost savings. Hence I strongly feel that organizations should not restrict their collaboration on one side but should do it both at the supplier and customer end. Organizations which have had experience say in supplier collaboration- should focus on extending it to customer collaboration end- this will be more effective as they can bank upon their learning while doing supplier collaboration.

It would be interesting to understand from you if you have done both supplier and customer collaboration and how has it benefited your organization and also the challenges faced.

 

January 2, 2010

Demand Planning in the CPG industry- The decade that was

I wish the readers a very happy new year and a happy new decade. This morning, I was reminiscing on my journey through the past decade, on how during the last 10 years I saw myself transition from a student to young professional to a doting husband to a responsible father. I concluded that life seemed much simpler 10-20 years back, in retrospect that is. Well, how is it connected to demand planning in the CPG industry (the topic of this blog)? You are right; there is no connection, except that demand planning in the CPG industry also underwent a transition during this decade, just as I did.

During the last 10 years, CPG companies saw a series of transformations in their external environment, which led them to re-think their demand planning processes.

Foremost, the decade saw significant increase in trade promotion spending (67% of marketing spend and 17% of revenues).  As a result, promotions and customer events drove the variations in the sales volumes. CPG manufacturers reacted by enabling their customer account teams (instead of HQ teams) to take more ownership of the customer forecasts, in the horizon they had the best information. On the process side, the need to separate the promotions generated sales lift from the base demand became more pressing in order to achieve better forecast accuracy. CPGs built simple custom logic to achieve the demand decomposition.  

Retailers became more powerful, private labels threatened the very existence of CPG. Product innovation became the key for the CPGs. With increased new product introductions and product varieties, number of SKUs increased manifold- so did the number of different and unique demand patterns. CPGs realized that one size didn’t fit all when it came to forecasting algorithms-product companies pitched in by adding more algorithms for forecasting different demand patterns.

Competition became global. China became a force to reckon with, challenging US companies on their very cost structure. Low forecast accuracy was already costing them millions of dollars in tied up inventories and lost sales. CPGs reacted by elevating supply chain management from mere demand and supply matching exercise to integrating it into their business and strategic planning process. CPGs rushed to implement structured S&OP workflows which gave them a single consensus view of demand that drove their end to end supply chain in the most optimal manner possible.  

S&OP process brought everyone together within the company. However, CPGs realized they cannot be looking at supply chain holistically without including their customers and their suppliers in their planning process- so collaboration gained the center stage.

Collaboration led to sharing of downstream data. CPGs discovered more automated uses of the downstream data. They started incorporating them into their demand planning process in lieu of shipment data. But not all retailers could provide downstream data. So CPGs used real time customer order information to sense and respond to daily changes in demand signals.

As they started using more and more of downstream data, they felt a need to manage all their demand signals in a central place- the concept of demand signal repository (DSR) was born.

DSRs, base forecasting, trade promotions management, S&OP, demand sensing and replenishment systems, when integrated, unlocked the possibilities for CPG manufacturers to shape the demand most profitability for their supply network.

In short, the last decade was all about CPG companies moving close to the point of consumption, on a quest to becoming demand driven. Most of the supply chain technology investments made by leading CPG manufacturers during this decade were towards the DDSN objective.

Yet, at the end of the decade, very few companies are even close to being demand driven. There is still miles to traverse. The next decade will see CPGs continuing to invest in technologies that will help them reach their vision of ‘sell one make one’.

What do you think?

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