JDA Makes Recommendations for Supply Chain Efficiency

Mass-market retailers can represent nearly half of a manufacturer’s revenue, and those that can successfully harness collaboration with this critical retail channel will gain a strong competitive advantage in a crowded marketplace.

Traditionally, both manufacturers and mass-market retailers have established a joint collaboration so that manufacturers are able to improve the accuracy of their demand forecasts and better manage their replenishment and inventory to fulfill demand from retailers.

Still, translating collaboration for long-range plans – eg, beyond one lead time – has proved elusive. Sensing this gap, leading mass-market retailers are adopting time-phased forecasting and multi-level inventory planning capabilities to generate integrated supply chain plans across an extended period of time. This increased visibility also benefits suppliers, with the potential to reduce variability, lower expediting costs, improve perfect order metrics, lower safety stock and proactively plan their supply chain to enhance overall customer service, efficiency and margin.

“To take full advantage of the retailers’ integrated and time-phased supply chain plans and translate them into new levels of customer connectivity, manufacturers must harness the synergy of Collaborative Planning, Forecasting and Replenishment (CPFR) and Sales & Operations Planning (S&OP),” said David Johnston, senior vice president of manufacturing and wholesale distribution, JDA Software. “By creating this unified process, retailers, wholesaler-distributors and suppliers can expect higher performance levels and a measurable competitive advantage.”

JDA offers manufacturers five recommendations for successfully linking CPFR and S&OP to create a consensus demand plan that can help to streamline the connection point between manufacturers and their mass-market retail partners:

Begin with a Best-Practice Methodology: By nature, processes built on best practices and lessons learned from industry leaders, such as S&OP pioneer Oliver Wight, are more scalable and repeatable. What’s key is finding a methodology that ties independent best practices into a more holistic process that involves all partners in the supply chain process. Manufacturers also should look for a methodology for connecting CPFR and S&OP that is built on insights from a combination of retail partners. Therefore, it will be easier for a manufacturer to “sell” its own mass-market retail methodology for connecting CPFR and S&OP.

Evaluate Your Technology Platform: Next, manufacturers must ensure that they have technology that is scalable and can support a linked CPFR and S&OP process. The worst-case scenario is retrofitting an emerging process into an old architecture or application built for a different purpose. “Purpose-built” S&OP applications have recently emerged in the marketplace that started with process as the foundation, making them superior to “re-tooled” demand planning or replenishment planning solutions that have been extended with reporting capabilities. Scalability is critical as time-phased demand planning generates massive amounts of data and an outdated system simply cannot support the integration of data at this level of granularity. Only by adopting an advanced and optimized enterprise-wide technology foundation will manufacturers be effective at integrating this data into a unified CPFR and S&OP process.

Take a Proactive Approach: Manufacturers’ success or failure in this integration process hinges on creating a foundation of support with their key trading partners. Without that support and trust, manufacturers will not receive the data and visibility generated by time-phased demand planning. Manufacturers should confidently and accurately portray how the data will be used to drive value to their trading partners upfront. This includes committing to such benefits as shorter lead times, higher order fill rates, improved on-time delivery and lower supply chain costs as a result of sharing this data.

Establish a Cross-Functional Team: Cross-functional teams have historically played a critical role in the development of a single shared forecast and replenishment plan with an assigned mass-market retail customer. However, in the past these teams have not been effective in ensuring that consumer demand data is translated to time-phased order plans and integrated into the supply chain, essentially defeating the purpose of the critical mass retailer providing this visibility. Manufacturers need to ensure that cross-functional teams have proven processes for migrating data gleamed from time-phased demand planning into a holistic CPFR and S&OP process.

Seek Executive Sponsorship: Significant change management will need to take place on behalf of the manufacturers and their high-volume trading partners involved in this process. Mass-market retailers are sharing larger data volumes at greater levels of detail than ever before, while manufacturers have been creating demand plans without this level of customer interaction for years. It is imperative that C-level executives make the process a priority to drive this organizational change and build a foundation of trust. Senior leaders will require a business case that can support the transition to this new working model and the data and that analytical toolsets are available to assist with quantifying the value. Companies can potentially accelerate behavior and process change by seeking out industry-leading consultants with proven track records for facilitating strategic processes and behavioral changes.

To stay ahead of the competition, manufacturers must shift to demand-driven production and supply planning. Unifying CPFR and S&OP models into a single process by following the aforementioned recommendations will enable manufacturers to realize unprecedented levels of customer connectivity, positively impact profitability, leverage time-phased demand-planning data generated by their mass-market retail partners and drive supply chain value.

JDA, www.jda.com.