Planning is a key factor in supply chain efficiency: to guarantee optimum product availability in line with set objectives, the various players involved (distributors, manufacturers, subcontractors) need to be able to plan their activities sufficiently in advance.
Planning encompasses the management of production capacity, raw materials purchasing, inventory management, etc. It aims to provide answers as to how the players involved in the supply chain are going to meet forecast demand, while optimizing resources and controlling costs.
At a more operational level, scheduling concerns the concrete allocation of resources, tasks and activities to achieve the plan established during the planning phase.
In a CPFR or VMI logic, supply chain improvement relies on increased collaboration between distributors and suppliers.. Sharing forecasts and projections should help each link in the chain to better plan its activity and schedule its operations.
In this article, find out why and how, thanks to the shared forecast, supply chain players could synchronize their action plans to optimize the supply chain.
Constantly evolving consumer demand
Ensuring product availability
The main goal in the supply chain is clear for distributors, manufacturers, and subcontractors: all logistics actors must organize themselves to ensure product availability rates meet their targets.
To guarantee this level of availability, retailers require a commitment from suppliers that expected volumes can be met.
Simultaneously, suppliers crave information regarding order projections and the workload they need to anticipate.
To improve product availability, the distributor needs to communicate order forecasts or projections in advance, so that the supplier can get organized, plan his workload and anticipate raw material purchases.
Fierce competition in the retail sector
Another benefit of collaborative planning is that it fosters a smoother relationship between retailers and suppliers.
Suppliers can rely on the forecasts shared by the retailer to anticipate and plan accordingly. They gain a long-term view of their operations, which might allow them to allocate resources more effectively. This also enables them to plan their raw material purchases, optimize their investments, and secure the longevity of their business.
Additionally, suppliers can smooth out the spikes associated with promotional activities since they receive information well in advance.
Conversely, when forecasts are not shared, suppliers are left to deal with order fluctuations and must always have surplus stock on hand.
For retailers, the benefits are immediate in terms of product availability, supplier reliability, and safety stock levels. It becomes easier to implement substitution plans, which are anticipated in case of any failure from either party, such as material shortages or production capacity constraints.
Using technology to optimize assortments
For suppliers, information shared by major retailers helps them manage storage capacities more effectively.
They gain visibility into the orders, deliveries, and stock projections for several months ahead. This allows them to adjust their inventory accordingly and optimize buffer stocks to minimize storage costs.
For certain products, like water, where production rates do not align with seasonality, suppliers know in advance the pace at which their products will sell. They can determine the necessary storage capacities and choose the warehouses where they will store goods, knowing in advance when they will need to dip into their reserve stocks.
With this knowledge, they can save on logistic space or anticipate their needs more easily.
Benefits of assortment optimization
When stakeholders share information in advance, planning becomes more efficient at all levels. This allows for a reduction in operational costs across multiple areas:
- Storage costs
- Transport costs
- Labor costs : Suppliers can anticipate production rates in advance and adjust human resources accordingly, for example, by planning to hire temporary workers during peak periods.
- Production costs : Production adjustments are made based on forecasts and projections. Providers schedule their production lines according to the technical performance of these lines and the current and upcoming order books. This prevents unnecessary overproduction and excess stock.
The benefits of using a pricing solution to optimize assortments
Collaborative planning also encompasses resource management:
- Purchase of raw materials
- Human resources
- Production capacity: From this perspective, collaborative planning is beneficial. For example, it helps manufacturers anticipate their purchasing needs. If necessary, they can avoid shortages or plan a substitution strategy with retailers..
- Transport and storage capacity: The supply chain involves numerous intermediaries, including carriers and subcontractors. Collaborative planning allows for effective communication of forecasts and order projections to these players. Carriers, for example, can better plan their resources. They can anticipate the potential hiring of a driver, which helps manage increased activity, considering it can take several months in some sectors (due to shortages, training periods, etc.).
Reducing waste
A lack of collaboration between retailers and suppliers leads to avoidable waste.
Indeed, to prevent stockouts, manufacturers overstock. This excess inventory increases the risk of breakage and losses, with a clear ecological impact.
Optimal communication of forecasts and projections is therefore crucial for a resource-efficient and environmentally friendly supply chain.
Two product examples illustrating the benefits of collaborative planning
Collaboration in planning is equally crucial in the bottled water market.
The amount of water supplied by thermal springs is constant. During the winter, producers produce and stock water as demand falls below production levels. For a significant part of the year, demand exceeds production.
In this context, having visibility into product flow several months in advance for large distributors and private labels allows for better storage capacity planning and optimization of space and logistics costs.
Meat and poultry
In trades such as meat and poultry, forecasting is essential, as the product’s optimal consumption window is very short.
By collaborating effectively on planning, we can easily imagine the supply chain, which receives order forecasts from the retailer, sharing the information with all the players involved. The latter will then be able to integrate the capacity requirement at the insemination stage.
In the same way, a poultry supplier needs to ensure that the chicken reaches maturity at the right time for projected orders. If it’s ready too early, we’ll have to continue feeding it, and so costs will rise. As a result, he has every interest in building on the shared forecast so that the product reaches maturity at the right time.
Water
Collaborative planning is also essential in the bottled water market.
In fact, the quantity of water produced by thermal springs is stable. In winter, the producer produces and stores water, and demand is lower than production. On the other hand, for part of the year, demand outstrips production.
In this context, having several months’ visibility on product sales for major distributors and private labels enables us to better define storage capacities and optimize space and logistics costs.
How can collaborative management between supply chain players be implemented?
In operational terms, this collaborative management approach is perfectly feasible. The concepts of CPFR (Collaborative Planning, Forecasting and Replenishment)or VMI (Vendor Managed Inventory) have been around for several years, and are well known to supply chain players.
Forecasting solutions, such as Optimix, enable us to establish reliable order forecasts and projections by product type, several months in advance, taking into account influencing factors and promotional activity. These tools make it easier to share the forecast with all stakeholders in the chain, in particular from the retailer to its suppliers.
Ideally, conditions are ripe for stakeholders to synchronize and achieve significant efficiency gains in the supply chain. Distributors can communicate information to their suppliers. They can organize and ensure optimal product availability while controlling resources and costs.
However, resistance persists. Some retailers remain reluctant to share information with their suppliers to maintain negotiating power. By doing so, they deprive themselves of an efficiency lever in the supply chain. The question arises: is it better to optimize availability rates, or is it preferable to compartmentalize information to negotiate from a position of strength?
In the long run, with new competitors (e-commerce pure players, sales aggregators, etc.) entering the market, collaboration is likely to become a significant competitive advantage.
Conclusion
From an operational standpoint, sharing forecasts is relatively simple to implement, and its beneficial effects on the logistics chain are well recognized:
- Better anticipation of demand,
- Optimization of resources,
- Control of costs,
- Improved product availability.
However, the implementation of collaborative planning still faces a silo mentality among players who wish to preserve their turf and negotiating power. Nevertheless, the evolution of retail and the emergence of new competitors encourage breaking down barriers and betting on collaboration.
Beyond efficiency gains, the collaborative approach also addresses the challenges of the green supply chain and sustainability.
Ultimately, it is not just a short-term solution but a key approach for the future of the supply chain. It paves the way for a more agile, efficient, and resilient logistics chain, ready to meet upcoming challenges.
