A new guideline to help companies create a model of their business will connect the consumer to the factory, according to the Voluntary Interindustry Commerce Solutions (VICS) Association. Its Collaborative Planning, Forecasting and Replenishment (CPFR) guideline covers how trading partners can better manage business processes to enhance the retail supply chain through improved demand forecasts.
Entitled “The Ultimate Retail Supply Chain Machine: Connecting the Consumer to the Factory,” the guideline was produced to help retailers and suppliers grow sales, reduce inventories and lower operational costs.
“The Ultimate Retail Supply Chain Machine” guideline develops the case for retailers to implement new automatic replenishment solutions called store level distribution resource planning (DRP) systems. These systems enable companies to:
• Create a bottoms-up model of the retail business that projects forecasted sales, shipments, receipts and inventories at all stores and DCs over a 12-month or longer rolling planning horizon;
• Detail in the model of the business the events and changes planned in their retail and supply chain strategies;
• Share accurate forecasts of future orders, called supplier schedules, with manufacturers;
• Create retail closed loop planning by tightly managing the tolerances between the bottoms up model of the business and the retailer’s top down strategies and financial plans.
• Accomplish closed loop supply chain planning with manufacturers who agree to build products as forecasted and who commit to protect product availability for retailers who share these forecasts.
“The benefits from the process are many, most notably jointly driving sales, lowering inventories and reducing manufacturing, transportation, warehousing and buying and selling costs,” said Larry Smith, senior vice president, planning and replenishment at West Marine, and co-chairman of the VICS CPFR Committee.
According to the guidelines, the new store level DRP systems are critical technology solutions that help retailers and their manufacturers to focus on increasing consumer sales—the key driver of value in their supply chains. These systems assist trading partners in building shared plans for consumer demand and supply, designing and delivering winning products and assortments while lowering variable operating and capital costs. They also have the capability to transform retail supply chains from disjointed inventory “push” systems to coordinated inventory “pull” systems based directly upon shared forecasts for consumer purchases.
“Traditionally, each trading partner in the supply chain has operated with disconnected systems and different goals and measures of success," said Joe Andraski, president & CEO of VICS. "Sharing of information routinely has been difficult, and technology has been lacking to flow through store level data into manufacturers’ planning systems. The new CPFR guideline helps supply chain trading partners align their operating forecasts and business plans with significant positive impact for the companies and their consumers.”