As retailers continue to reduce inventories across the supply chain, many suppliers are forced to follow suite to reduce their own inventory carrying costs. It starts with the retailers and rolls right down the supply chain. This is not a straightforward or linear problem for suppliers. They realize that they must cut inventory-carrying costs and yet they’re still required to maintain customer fill-rates, lest they be fined or penalized for short-shipping, late shipping, wrong shipping, and the list goes on. Ultimately, they are still held accountable for on-time delivery and in-stock positions.
There is one clear opportunity to mitigate this risk: exploitation of retailers’ point-of-sale (POS) data that provides essential real-world facts and insight into actual consumer demand. If leveraged correctly, this type of supply chain intelligence can improve a supplier’s ability to cut inventory costs while strengthening inventory positions at the consumer purchase point. And, there are perhaps even more significant benefits to sales, including cross-sell, up-sell, and promotional activities to mitigate returns of slow-selling, surplus inventory – important information to have in any economic climate.
Complicating the inventory problem is that the supply network is far more global, outsourced and challenging to manage than ever before. There is no shortage of papers and studies written about the subject of inventory optimization and there’s certainly no magic fairy dust to throw at the challenge; however, the growing popularity for CPG companies in the use of customer POS data to impact inventory management techniques, demand planning models, purchasing decisions, and ultimately inventory is proving to be cost-effective and impactful.
Traditionally, these companies have used historical sales reporting, pending orders, and customer forecasts to try and make the inventory management problem a little bit easier, but there’s a vast increase in the use of on-location customer POS data and trading partner intelligence to support decisions about inventory.
What is Supply Chain Intelligence?
Supply chain intelligence is a pretty all-encompassing term. It can include anything from the use of POS data to on-time delivery data and fill-rate data, both upstream and downstream in the supply chain. Pervasive use of fact-based intelligence is one thing that companies can do to improve their own IQ, using real-world data to make decisions about what inventory to carry and not to carry. POS intelligence is just one example part of much broader supply chain intelligence category, that, when directly embedded in operational business flows, shows material and measurable returns across the supply chain.
POS information is nothing more than actual consumer sales data from retailer POS systems. What’s difficult to believe is that many companies have not been able to make good use of or exploit this data; and this is asset that’s readily available to them from many of their retail customers. POS intelligence is a very effective tool to attack the problem because it collects data across their retail customers, and offers an aggregate view of product performance by geography, store, over time, season, by customer or across customers. Most companies have spent years trying to figure out how to exploit this data for their executives and sales staff. The good news for today’s suppliers is that today’s POS intelligence services can be implemented in two weeks or less and actual adoption rates by business professionals is among the highest of most any business intelligence category.
POS intelligence, which can easily be delivered via a subscription-based Software-as-a-Service (SaaS) model, can improve decision making processes for suppliers in a number of ways, including:
• Proactively identify in-store issues, such as out-of-stock and surplus inventory situations
• Improve forecast accuracy and optimize inventory levels with visibility into in-store consumer purchase trends
• Enhance customer satisfaction with retail customers and end users
• Gain a competitive advantage by forging stronger relationships with retail trading partners
Exploiting this data was difficult until now because retailers do not deliver this kind of data in a consistent format, with consistent attributes, on a consistent time-schedule, creating a giant mess for suppliers to normalize it for consumption by the business. A POS intelligence service is built to solve these problems quickly and easily. These services are very cost-effective and offer time-to-value metrics that are virtually impossible to deliver in a built-it-yourself model.
When is POS intelligence most effective?
There are a couple of obvious areas where POS intelligence should be implemented. One is with new product introduction. Anytime a consumer goods company is bringing a new product to market, whether it is in a select group of stores, expanding to other territories or to new customers, the management of inventory is a critical test. Success sometimes begets failure if you have wild success but didn’t plan properly and can no longer meet demands at the consumer point-of-sale. New product introduction is a perfect situation for putting this kind of knowledge into the hands of salespeople and supply chain managers.
In addition, if you have a particular item, where seasonality and the cost of returned goods are critical metrics, you really want to understand inventory conditions at store locations so you know when the optimal time is to promote to try and minimize the expense of returns.
Conclusion:
When it comes to inventory management and optimization, POS intelligence can equip consumer goods companies with the information they need to fully leverage their customer relationships and expertise to drive sales, reduce inventory carrying costs and improve their forecast accuracy.
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