Sales Are Booming! Now I ve Really Got Problems. When you are in demand, you need to deliver the goods - without inflating costs and inventory.

Transcription

1 Sales Are Booming! Now I ve Really Got Problems When you are in demand, you need to deliver the goods - without inflating costs and inventory.

2 So many retailers and distributors see a sales increase as a panacea, and yet when sales do grow, problems arise faster than ever. You can pump up inventories to get every sale, but then you ll have to cut off the inventory spigot when Finance protests about cash or cost issues. Without a clear resolution, sales and costs sway back and forth like a pendulum. Without a clear resolution, sales and costs sway back and forth like a pendulum REDUCED MARGINS OVERSTOCK EXCESS COSTS LOW INVENTORY LOST SALES DISAPPOINTED CUSTOMERS For many, the pendulum effect is too familiar. Sales go up, inventory becomes excessive; and then cash gets tight, inventory drops and customers are disappointed. The pendulum effect stems from the misalignment of inventory with potential sales. More importantly, that misalignment, which is costing you revenue and profit, has everything to do with your supply chain planning. blueridgeglobal.com Sales Are Booming! Now I ve Really Got Problems 2

3 What Will You Do? To some it s a revelation that difficulty managing growth is caused by their supply chain. For others, inconsistent results are often obscured, or it is an accepted casualty of business. Whether you can t see it or you ve come to accept it, you must deal with it. The New World Customers have more information and purchasing options than ever before, they make decisions faster than ever, and when they decide they want something, they want it immediately. We ll spare you a speech about a new world and big data, but understand many, maybe even your competitors, are already adapting and thriving. Take one automotive distributor for example. CRP Industries, a supplier of both automotive and industrial goods, has increased sales double digits without increasing their overall inventory investment by a single penny. This paper has two goals: 1 To brief you on how your supply chain planning approach is fundamentally tied to financial and inventory performance issues. Businesses have access to tremendous amounts of data about their customers, and they have a greater ability to leverage that data to influence demand, precisely plan for demand, and respond to changes in demand. 2 Show you a new approach that will ensure an end to the swinging pendulum, help you capture every sale, and keep inventory and costs in check. To avoid disappointing customers and missing sales, retailers and distributors need to ensure product availability, and they need to do so without creating pockets of excess and misaligned inventory and incurring excessive costs. If you re curious about how exactly the supply chain status quo is killing your business, go ahead and read the next section: How Your Supply Chain Stunts Growth. If you ve already experienced the revelation that your supply chain planning is flawed and are looking for a way out, by all means jump to the Saving Commerce from the Status Quo section. blueridgeglobal.com Sales Are Booming! Now I ve Really Got Problems 3

4 How Your Supply Chain Stunts Growth You might not realize exactly how your supply chain causes growth to be more pain than panacea, but one imperfection in your supply chain actually creates a ripple of issues across the organization. Take a look below at how these supply chain flaws are manifested into recurring business problems. If any of these situations are familiar to your business, you may need to rethink the way you approach your supply chain. 1Lack of, or Inaccurate Forecasting Means you can t effectively predict what your customers will purchase from you. This leads to excess inventory, stockouts, slow turns, and relentless pendulum swings in customer fulfillment and inventory levels. With inadequate or inaccurate forecasting, companies are constantly stuck in a reactionary mode, searching in vain for ways to recover. 3 Siloed Information Means that access to planning data is inaccessible by the necessary departments within the company. This leads to limited visibility, the inability to predict future sales, and the inability to align operations to maximize cash and profit positions. Organizations may have difficulty balancing merchandise, operational and financial plans. A lack of communication makes it difficult to track and improve supplier performance, receive or stock inventory effectively and efficiently, and synchronize the goals of Merchandise, Finance, Planning and Operations. 2Imprecise Demand Planning Means you don t effectively stock inventories to fulfill demand at the proper time. This produces both stockouts and excess inventory that requires the frequent need to take costly corrective actions to get inventory in the right location at the right time. Imprecision in the demand plan contributes to reduced margins, poor cash flow, warehouse capacity issues, and more. 4State of Distrust and Acceptance of Status Quo Means that you don t trust the recommendations of your solutions or your staff, and ultimately you acquiesce to the notion that you can do nothing about it. This leads to loss of hope in the possibility of effectively predicting and planning, forcing the team to fall into reactive habits, constantly fighting fires, and simply accepting this is the way things are. blueridgeglobal.com Sales Are Booming! Now I ve Really Got Problems 4

5 Here are some common problems with many status quo solutions: The data that feeds the forecast is too vague. It doesn t provide for analysis, like analyzing every single customer transaction individually to understand what causes demand. The Smoking Gun? Check Your Supply Chain Solution The truth is that the problem is likely the way your supply chain solution was designed. Too many traditional supply chain solutions aren t focused enough on the intricacies of retail and distribution supply chain conditions, and they were designed in an era where today s rich data and relatively inexpensive computing power weren t available. This means they use ambiguous data and too many assumptions, estimations and averages. With many of the variables that impact the supply chain effectively ignored, you are left to rely on imprecise recommendations that are often inaccurate. The forecasting method is incomplete. Doesn t take advantage of what influences demand, like discounts, events, advertisements, etc. The planning method is imprecise. It doesn t consider current and future inventory levels across all locations, or other practical realities of the supply chain, like - supplier lines, ordering schedules, logistics constraints, capacity limitations, holidays, etc. The foundational approach may not be focused on retail and distribution. The solution may be too generalized, like - ERP, or solutions adapted from manufacturing, or credit analysis, etc. The recommendations for action are not precise or transparent enough to gain the trust of the users and management. Which causes manual intervention, like costly corrective actions to get inventory to the right location at the right time. blueridgeglobal.com Sales Are Booming! Now I ve Really Got Problems 5

6 Fortunately, death by statistical averages, estimates and assumptions is no longer necessary. Now you can unravel the factors influencing customers to buy, enabling companies to approach supply chain planning in a way that affords tremendous precision and huge financial benefits. Saving Commerce from the Status Quo With today s advanced technology and analytics, we can analyze much more than vague historical sales data. We can begin to understand the context and influences behind customer buying decisions, including causal factors like promotions, events, advertising, display impacts, price, SKU relationships and more. This information is the vital to accurately forecasting what customers will buy in the future and when they will buy it. Accurately predicting which products your customers will buy and when they will buy it is the first step to leveraging your supply chain for a better top and bottom line. The second step is planning your inventory orders to suppliers in the most economically optimized way possible, while still considering logistics constraints such as supplier minimums, ordering schedules, etc. Due to the computing power of the Cloud, you can now automatically calculate, with economic optimization unique to your business, an entire year s worth of future inventory orders. And that order plan can be automatically updated and adjusted as conditions change in your supply chain or in the market. Your demand planners and inventory analysts will transform into strategic demand planners that meet customer needs at the lowest possible risk and cost, making them direct contributors to your bottom line. Precision inventory planning and rapid response to changing conditions (internal and external) are the keys to eliminating lost sales, increasing turns and improving margins at the same time. blueridgeglobal.com Sales Are Booming! Now I ve Really Got Problems 6

7 Top 25 Foodservice Distributor Consistently attaining 99.65% service levels Reduced overstock by 25% Reduced lost sales by 40% Increased labor efficiency by 40% + 40% efficiency What s at Stake? Having a hard time believing that changing your supply chain approach could really have that big of an impact? Leaders in various industries have already started to capitalize on this newly enabled understanding of the customer and precision planning capabilities. By improving supply chain planning, they have dramatically improved key performance indicators (KPIs) that directly contribute to increased profit and margin. Major North American Hardware Retail Chain Increased service levels by 2.5% Reduced excess inventory by 10% Global Distributor of Industrial and Automotive Goods Grew sales by double digits Improved fill rate to greater than 95% without increasing inventory Brought backorders down to their lowest level in company history Leading European Retailer of Safety Products and Cleaning Supplies Increased product availability by 8 percentage points Increased turns by 3.6 Reduced inventory by 25% Major HVAC Distributor Accomplished the following in just 5 months Increased service levels by 4% Reduced inventory 25% Decreased orders by 31% Reduced overstock by 47% Achieved double digit growth Regional Food Wholesale Distributor Increased revenue 12% Reduced inventory 14% Increased profits by 181% 25% inventory reduction 181% profit increase blueridgeglobal.com Sales Are Booming! Now I ve Really Got Problems 7

8 Like yours, these companies markets are always in flux, with customer behavior constantly shifting and new competitors popping up every day; yet, these market leaders are thriving. Eliminating excess inventory and increasing turns and service levels is crucial to keeping cash in your pocket and competitors at bay. You can learn more about how these companies revolutionized their supply chain planning approach and are staying ahead of the pack by contacting us directly at: Or you can visit us on the web at