Retail Supply Chain Execs Aim for Better Demand Planning


Retailers are increasingly establishing an integrated demand planning process that better forecasts demands across the channels through which they sell products. A new report from Auburn University’s Center for Supply Chain Innovation states that while retailers have historically forecasted demand for in-store and online channels separately, more retail supply chain executives are using, developing or considering applying a more integrated approach.

According to the annual report, “The State of the Retail Supply Chain,” 29% of executives surveyed are already using an integrated demand planning process, which provides a more “granular level” of demand forecast. Thirty-one percent are “in development” of applying the process and 21% are considering integrated demand planning.

The integrated approach helps retailers understand inventory levels across online and in-store channels. It requires retail supply chain organizations to apply data analytics and other technologies, the report said.

“Integrated demand planning requires a shift away from the top-down demand forecasting approach currently in use. Instead, a bottom-up approach focused on aggregating demand at the store level and by sales channel is needed,” the report said.

Many retail supply chain executives surveyed for the report plan to increase their investments in supply chain process improvement and omnichannel fulfillment. Fifty-six percent said 2016 investment in supply chain process improvement would be higher than 2015 investment, and 42% said it would be able the same. Nearly half, 49%, said they would increase investment this year on omnichannel fulfillment, while 33% said it would be on par with 2015.

Supply Chain Changes

Retailers are taking note of growing consumer demands for omnichannel offerings and are having to think of new ways to manage their supply chains. According to the National Retail Federation, about a quarter of retailers offer buy online, pick up in store options for customers, 50% offer free return shipping on online orders and about half of brick-and-mortar retailers show in-store product availability on their website.

Target recently announced it would increase the number of physical stores around the U.S. it uses as “mini warehouses” to fulfill online orders. Currently, Target staff at 1,800 stores pick products sold online from the stores’ shelves of backroom inventory and pack them for delivery. While it is satisfying customer demands, Target CEO Brian Cornell said it does add a level of complexity to the business, Internet Retailer reported.

Business Impacts

As retailers make changes to their supply chain to better respond to shifting consumer demands, supply chain executives need to understand and plan for the broader business impacts. The Auburn University report pointed out supply chain system upgrades and operational changes has a direct impact on human resource management. Employees must be trained and educated on new processes and technologies. Some executives surveyed for the report said they were creating cross functional teams to support the execution of new organization and ensure any new technology would be used.

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