BrainTrust Query: Why are European retailers closer than U.S. retailers to achieving the optimal demand-driven supply chain?
U.S. retailers, currently dealing with a stagnant economy and pressure from more European retailers entering the domestic market, are reassessing what it takes to gain and sustain a competitive advantage in the industry.
The main goal of the retail supply chain has always been to get the right product to the right place at the right time and in the right amount. Due to limited and costly space, many European retailers have focused on demand-driven, computer generated ordering processes that they see as bringing them closer to achieving an optimal supply chain. In contrast, the U.S. retail environment appears more focused on the supply chain than on the demand chain.
Global retailers indicate that the transformation to demand-driven replenishment can provide substantial returns. Retailers have reported to SAF USA that they are achieving sales increases of between 0.5 percent and 1.35 percent. Lowering inventory by 30 percent while reducing out-of-stocks by 60 percent is not uncommon.
The impediment to many new implementations is the prospect of an "all or nothing" plan. Therefore, a new methodology that can take the large journey and break it down into steps is becoming popular. Typically, it involves three phases: 1) Forecast Assisted Ordering; 2) Predictive Inventory Ordering; and 3) Full Computer Generated Ordering. Each step requires incrementally more information and effort while providing incremental benefits along the way.
Discussion Questions: Do you agree that European demand-driven supply chain efficiencies are well ahead of their U.S. counterparts? Why or why not? Do you think U.S. retailers will be more apt to take a gradual approach to implement computer generated ordering rather than leaping into an "all or nothing" approach? Do you have other recommendations for U.S. retailers?