Introduction
For the past few years, we have entered a situation of “permacrisis”. The COVID crisis, climate change, raw material shortages, recruitment difficulties, uncertainty is now permanent.
In this fog, reliable forecasts are essential to reduce uncertainty and give retailers visibility. By relying on reliable forecasts, they can act proactively to absorb shocks and limit negative impacts.
While the retail sector is the only one able to know and anticipate consumer demand, why not make the whole ecosystem benefit from it?
In times of crisis, calculating a forecast for oneself is not enough. To gain efficiency throughout the supply chain, it is important to communicate with upstream and downstream partners.
Sharing forecasts with partners (suppliers, logisticians, transporters) makes collaboration between all the links in the supply chain more fluid. Partners are thus able to calibrate their production, the size of their teams, warehouse stocks, transport needs, etc.
Internally, sharing the forecast facilitates the calibration of promotional activities, financial visibility and management control. At store level, it provides valuable information on future expenses and activities.
In this article, we will explore in detail the benefits of the shared forecast for retailers and their ecosystem.
Give visibility to suppliers
Better timing of production and anticipation of resource requirements
The shared forecast gives manufacturers valuable information for optimizing production.
Several months in advance, they have visibility on demand peaks and can organize themselves accordingly. They know exactly when to launch production to meet demand. They also no longer need to plan for a large safety stock because they are less dependent on fluctuations in demand.
The visibility provided by the forecast helps manufacturers to better time their production to
- Save money on inventory
- Optimize production, human resources and machine use
- Consume less energy
- During slack periods, when retailers set their promotional activity, manufacturers know that they will have to produce for the promotion and can anticipate production peaks.
Optimize raw material purchases
At the same time, the industrialist must also obtain supplies of materials. However, given the shortages, the supply of raw materials is sometimes difficult.
With the sharing of forecasts, he knows in advance what he has to buy and in what volumes. He is therefore able to anticipate and better organize purchases from his suppliers. They can adapt their purchases to fluctuations in raw material prices and gain negotiating power with their suppliers.
Forecasting is also a way to “get around” a shortage of raw materials.
For example, a manufacturer knows that he must produce a large quantity of cakes for a distributor in a few weeks. The recipe involves sunflower but the material is not available.
In this case, thanks to the forecast, the producer can communicate transparently with the retailer to take an alternative decision: change the recipe, cancel a promotion on the product in question, rework its assortment, etc.
Give visibility to logisticians
Streamline collaboration
Sharing forecasts with supply chain actors increases efficiency at all levels of the supply chain.
If you outsource all or part of your logistics to a third party, sharing the forecast gives your partner visibility on volumes.
The logistician knows upstream what he will have to take out of his warehouses. He also has a view on the goods he will receive, several months in advance. So he can plan overflow warehouses or anticipate a reduction or an increase in the storage capacity he allocates to you.
Sharing forecasts also allows for better control of space management for products that are complicated to store, such as water for example.
With the forecast, the retailer and the logistician can easily adjust the logistic and human capacities at the warehouse level.
Optimize the transportation plan
In the same way, forecasts facilitate the implementation of a transport plan. If you outsource part of the transportation, you can use the forecast to anticipate operations.
You can plan in advance the reservation of its transport capacity. For road deliveries, you give your partner reliable elements to anticipate his equipment purchases, the recruitment and training of drivers, …
From this point of view, the forecast is all the more valuable as there are many constraints:
- Regulatory constraints: drivers must undergo specific training for the transport industry
- Labour shortages
- …
Better planning of in-store activity
Thanks to the forecast, stores can anticipate changes in facings, new locations, the impact of promotions, the end of product life, etc.
Store management is also able to anticipate human resources needs and develop the versatility of their teams.
Depending on the estimated needs, the store can decide to train employees in cashiering, shelf setting. Instead of suffering the peak of activity, you make employees more versatile to better absorb the additional load.
Improve alignment with finance and controlling departments
When a CFO has a handle on purchasing, delivery, sales and inventory forecasts, these departments can better plan cash flow, assess variances from budget and adjust strategies accordingly.
This reduces financial risk and optimizes cash flow.
The finance department sees planned purchases in advance and knows its working capital requirements.
In the same way, management control certainly establishes a budget by product family. Here again, the forecast allows you to:
- Consolidate forecasts
- Control any overruns
- Adjust operations in the event of a significant difference between the forecast and the actual
Calibrate safety stock and warehouse management
A shared forecast provides all players with a single vision or a coherent breakdown of the impact of future consumer demand on their business. This allows everyone to optimize their safety stock.
A poorly adjusted stock will inevitably affect your profitability:
- If the stock is too low,
- As a supplier, orders from distributors cannot be fulfilled and consequently stock-outs occur,
- As a distributor, you risk stock-outs in stores, and therefore customer dissatisfaction
- If it is too high in relation to demand, excess inventory generates operational costs. In addition, you risk having to sell at a loss to clear the overstock, or generate scrap.
Conversely, by calibrating your safety stock according to demand forecasts, you avoid shortages and overstock, with an immediate impact on your storage costs, on your breakage, and on your turnover/margin. The objective is to improve availability, while reducing inventory levels, logistics costs and breakage.
Conclusion
With the sharing of forecasts, the activity of all the actors involved in the supply chain is synchronized with consumer demand.
The industrialist plans his raw material purchases, his planning and his production capacities thanks to the forecast. The logistician and the carrier anticipate the needs and their operational management in relation to the forecasts shared by the distributor.
Internally, stores can adapt their human resources needs according to demand. The forecast also facilitates the monitoring and control of budgets.
The shared forecast facilitates communication between the retailer and its partners. It facilitates the control of logistics flows and stock levels to anticipate shortages and optimize the entire supply chain.
Optimix XFR : Optimize your supply chain with shared forecasting.
To gain profitability, you would like to reduce your inventory levels while maintaining product availability. This is possible as long as you align your inventory management and procurement with consumer demand.
Our Optimix XFR supply chain solution analyzes your past sales data to forecast consumer demand. The solution corrects your sales history and then automatically calculates the forecast for future periods.
You can thus anticipate future logistics flows and have reliable data to plan operations with your partners.
