“Collaboration” has long been a favorite word of supply-chain executives, but it often lacks substance. “I spent eight years doing demand planning,” says Roy. “I never really saw it happen.”
The problem, he says, is that suppliers and their customers have yet to surmount the “trust barrier,” when it comes to exchanging critical information.
Years after creation of the Collaborative Planning, Forecasting and Replenishment (CPFR) model, and access to detailed point-of-sale (POS) data, companies are still failing to collaborate fully. “With some suppliers,” Roy says, “you can see what was sold yesterday, but not a lot of things that happened in between.”
Merchandisers often have but a vague notion of how a change in pricing will impact demand. Access to POS data doesn’t appear to have sharpened their forecasting acumen.
The ideal planning horizon is 60 to 90 days, Roy says. But many companies can’t accurately see that far ahead. In addition, they lack knowledge of what their competitors are doing on the pricing front.
“You’re only seeing half of what’s going on,” he says. “You can have a strong relationship with a grocery chain, but you don’t know if two-thirds of the volume is going to happen, because they can’t tell you if your competitor is changing its price.”
Roy likens that area of the unknown to “chaos.” Simply put, “you don’t control all the pieces.” As a result, companies attempt to protect themselves with expensive safety stock.
Roy says suppliers and retailers need to react more quickly to trends in the marketplace, smoking out problems before they happen. That means involving supply-chain partners all the way back to the manufacturing stage.
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