In 2010, I wrote a strategic report on shelf-level collaboration – i.e., on how manufacturers can help retailers achieve a better in-stock position for their products. At that time, I concluded that many consumer products companies had initiated pilot projects, but very few had made significant improvements. There were many examples of individual divisions collaborating effectively with individual retail companies, but very few examples of companies that had been able to scale those efforts.
The times, they are a changin.
I am coming across more consumer products companies able to leverage downstream data to become increasingly demand driven.
Bob Wood, Director of Sales Planning & Operations at Sony Computer Entertainment America (SCEA) – better known as PlayStation – spoke at Oracle OpenWorld a couple of weeks ago (Oracle is an ARC client). SCEA is currently using a Demand Signal Repository (DSR) from RetailSignal, which provides business process outsourcing (BPO) services based on Oracle’s Demand Signal Repository.
The DSR, in combination with improved collaboration with the sales team, is enabling a much more effective promotional process. For many consumer goods companies, promotions represent a significant amount of annual revenues. In some product categories, a promotion can drive volume ten times higher than it would otherwise be during the period in question.
Prior to implementing RetailSignal, SCEA had a person dedicated to analyzing sell-through data. That person would work all week long using an Access database to create a sell-through report on Friday. By then, the data was one week old. The various business teams could not affect changes in less than a week, which meant a two-week lag in effectively using the granular demand data.
SCEA made the transition to RetailSignal with a 90 day implementation. Now it gets POS data from 25,000 stores across retailers such as Target, Best Buy, Walmart, and others. With this data and the new platform, SCEA can create an out-of-stock/by store/by retailer report. The process takes just four hours.
From a supply chain perspective, this allows SCEA to be more responsive. Before the transition, the company assumed the inventory at retail locations was evenly distributed. Today it can align inventory to promotions more effectively, as well as show retailers which stores have sold out and need to be replenished from that retailer’s distribution centers.
Store replenishment is based on min/max logic, what SCEA calls MinPQ, which stands for minimum presentation quantity. At SCEA they say “2 to go, 2 to show.” In other words, the minimum presentation at the shelf is generally two, with at least two units kept in the store storage area. SCEA now knows when there are less than four units at the store and when the store needs replenishment.
In addition to allowing PlayStation to sell more units during promotions, Bob said that “knowledge is power.” This information “allows for a very intelligent conversation with retailers. Conversations with retailers are now less speculative, … (much) more fact-base driven. With the data, the tail is wagging the dog!”
Perhaps part of the reason we are seeing consumer goods companies become more demand driven is that the out-of-stock analytics that ride on top of the demand signal repositories are both better and more prevalent. But this avalanche of data is also pushing existing demand management systems to the limit, which is too bad because demand forecasts are often improved through the use of downstream data. Oracle recently introduced a new in-memory solution called Oracle In-Memory Consumption Driven Planning that is designed to deal with this data explosion (See Oracle OpenWorld: New Value Chain Solutions).
In our field, we’ve been talking about becoming more demand driven for years. Finally, we are seeing more examples of consumer goods companies beginning to achieve this vision.Google+