Analyst Insight

Retailers are making a fundamental shift in the way they do business by implementing a demand-driven model that coordinates processes and technology to understand, shape and respond more efficiently to consumer demand.  Successful demand-driven retailers master five strategies: store and cross-channel operations, consumer-centric merchandising, product development, agile supply networks, and on-shelf availability.  Cross-functional management of these strategies drives supply chain improvements in three key areas - return on assets (ROA), inventory turns, and revenue growth.
-Michael Griswold, research director at AMR Research

Leading retailers have one thing in common: they understand and embrace demand-driven retailing principles. Supported by the alignment of people, processes and technology, demand-driven retailing strategies improve supply chain efficiency. Here's how demand-driven retailing can improve your supply chain.

• Return on assets. Business processes play a vital role in effective asset utilization. Use workforce management (WFM) and task management initiatives to empower store employees and make them more productive. New web-based WFM applications provide central management and visibility of labor allocation. Couple WFM with task management to ensure you incorporate all demand, including home-office mandates, into the labor forecasting equation. This results in more accurate forecasting of demand, consistent scheduling processes, streamlined store execution, and effective labor management across the chain.

• Inventory turns. Inventory turns represent the number of times a retailer cycles through its inventory. Retailers with high inventory turns realize lower inventory holding costs resulting in improved net income and profitability and increased flexibility and responsiveness to changes in consumer demand patterns. Perpetual inventory (PI) and computer-generated ordering (CGO) provide a solid foundation for real-time inventory visibility and automated generation of product orders. PI and CGO can lower inventory levels, increase inventory efficiency, and align store replenishment with customer demand.

• Revenue growth. Understanding customers and consistently exceeding expectations often correlates into revenue growth. To accomplish this, use consumer insights data, internally and externally, when making assortment and space allocation decisions. Also, innovative and unique products and services will provide a special shopping experience and capture a greater share of wallet. Consumer-centric merchandising integrates demand, assortment, allocation, space management, pricing, and promotional planning processes, allowing retailers to align product and promotional decisions with store-specific consumer demand signals. Organizationally, retailers must move merchandising and marketing functions from traditional, vendor-driven events to more collaborative and consumer-driven promotional strategies.

The Outlook

The future is process, not technology. To drive sustainable performance, retailers must understand the need to embrace demand-driven retailing principles. Supported by the alignment of people, processes and technology, demand-driven retailing strategies improve supply chain efficiency.