THE CONSUMER

DRIVEN

SUPPLY CHAIN

Achieving a Real Time Value Network

Let’s set a baseline

Organizations are segmented and “silos” within and across companies

Long term planning not connected to Short Term

Planning is disconnected from execution

SUPPLIERSMANUFACTURERSCPGRETAILERSCUSTOMERS

MERCHANDISINGCATEGORY MANAGEMENTMARKETINGSALESSUPPLY CHAIN

Traditional Sales and Supply Chain

Approach

What is Consumer (demand)

Driven?

Being demand driven means everyone in the supply

chain is focused on the end consumer.

Consumer-Driven Guiding Principles

A supply chain is actually a “community of trading partners”» Everyone wants to drive value for their business» Everyone should focus on actual sales. It is the only thing that matters

Demand-driven means you must start at point of demand » Must be able to model store (point of consumption), SKU, Day » Must be able to adjust based on actual consumer demand

Never forecast what you can compute» The only sales forecast should be the further most forward node» Everything else should be a calculated order forecast

To optimize the network you must concurrently deal with demand variability, supply variability, constrained capacity and lead-time variability

Continuous, incremental and interactive planning, execution, and performance management must reside within the shared community

» Provides the ability to sense change, rapidly create intelligent responses, execute the responses, and then analyze performance enabling process improvements

Barriers To Achieving Consumer Driven

Inadequate information sharing

Organizations are dispersed and not

focused together on lowest cost and

highest service

Change management

Planning to multiple and

disparate forecasts

Systems are batch and supply

chains are real time

Trends in the Consumer Driven Supply

Chain

Visibility has become increasingly

important as companies pay more

attention to supply chain risk, such as

natural disasters, human rights abuses,

raw material shortages, etc.

Cloud solutions have found wide

application in certain industries such as

retail and consumer goods in North

America.

Planning cycles are becoming shorter.

Six Benefits Of Supply Chain Visibility

Improve in-store availability, reduce end-of-season markdowns, and increase supply chain operations efficiency.

Make more profitable decisions, match your strategic and tactical plans with local customer preferences, and drive overall profitability.

Shorten end-to-end pipeline time.

Reduce uncertainty and the need for safety stock.

Stop missing opportunities when customer orders with short lead times can't be met – be ready and able to profit.

Increase the quality of information sharing, and build an “information-enriched” supply chain.

Eliminate Bullwhip Effect

The longer it takes to propagate a supply or

demand shift the longer people are doing the

wrong thing

Lead-

Time &

Lead-

Time

Variability

Time

DCStore DIST/TMSDC Tier 2MFG Teir1

Inventory

Overstock

Under stock

Coping with Bullwhip within 4 WallsDemand Signal

Response

SignalVariability

Your Enterprise

Poor visibility to

real-time demand

signals from

foremost

consumption

locations

Your ERP/APS work

very hard trying to

cope with the

variability

Lead-time to

respond

Poor visibility to real-

time supply signals

from multi-tier

suppliers

Your Current Value Network

Your EnterpriseCustomers Suppliers

Demand Signal

Response

SignalVariability

In a Real Time Value Network (RTVN)

Your EnterpriseCustomers Suppliers

Demand Signal

Response

SignalVariability

RTVN Time Compression

Your EnterpriseCustomers Suppliers

Demand Signal

Response

SignalVariability

RTVN Dramatic Variability Reduction

Your EnterpriseCustomers Suppliers

Demand Signal

Response

SignalVariability

Dramatically Improve the Productivity of Your

Investments

Demand SignalResponse Signal

Variability

Your EnterpriseCustomers Suppliers

Network View of

Consumer DemandYour Enterprise (IBP)

Networked View of

Supply

ERP / APS

Reduce data staleness from 19

hours to 7 hour

POS 1 – 9 pm

POS 2 – 10.am

POS 3 – 2 pm

BOH

Othe

Peak sales at

9am, 1pm, 8pm

End to End Lead Time and Flow*

ApproachMaterial

Lead Time

Information

Lead Time

Traditional 33 days 29 days

Network

Enabled< 33 days 0 - 1.5 days

Traditional supply chain models are challenged by having all

parties work with linear planning and replenishment processes

Push model with all participants planning and replenishing to forecasts instead of actual demand/real time

consumption

Business rules do not evaluate the supply chain as a single system but as individual nodes each operating

asynchronously. Each node has its own view of demand and inventory with no visibility beyond the next tier.

Demand and information signals are received by each supply chain partner sequentially, therefore it can take

suppliers weeks and even months to react to changes, promotions and stock outs felt by the consumer

Traditional Approach with Information Latency and Demand Distortion

Batch Systems Siloed Supply ChainSkewed Demand

Signals

MFG DCs T1 Suppliers T2 Suppliers

1 Day/Hours

3 Days

Stores

Consumers

3 Days 21 Days 3 Days 3 Days

Factories

Information Lead Time & FlowLegend: Material Lead Time & Flow

Retail DCs

7 Days7 Days7 Days7 Days

What is Required to Eliminate Information Latency Across the

Value Network, Reduce Variability & Enable a Demand Driven

Replenishment in Real Time ?

End to End Lead Time and Flow*

ApproachMaterial

Lead Time

Information

Lead Time

Traditional 33 days 29 days

Network

Enabled< 33 days 0 - 1.5 days

Freight Forwarder

Network PlanningLegend:

Collaborative Response

National/ MFG DCs

T2/ Intl Suppliers

Stores/ Dealers/ Distributors

Brand Owner/ Manufacturing

Regional/ Customer Facing DCs

3PL’s/ VMI

EMS/ ODM

Initial ForecastActual Demand

Mins-Hours

Mins-Hours

Mins-HoursMins-Hours

Mins-Hours

Mins-Hours

Mins-Hours

Mins-Hours

Incremental Change

Companies operate in networked

fashion

Demand signal is synchronized across

all companies

Elimination of information latency

Real time visibility to changes in demand

and supply

The

VALUE

Network

in

REAL

TIME

Put Your Supply Chain on Auto Pilot – Decision Making

Real Time

Many to Many

Multi-echelon

Consumer Driven

Decision Making with Monitoring

Planning married to Execution

Subscription based

Embrace valued systems

Integrated Business Planning (IBP)Plan out variability. Plan for Profitability and Business Continuity

IBP provides a single version of the truth for forecasting, promotions, new

product introductions, contracts and financial plans. It supports all areas of the

business: finance, merchandising, supply chain, etc.

Continuous Forecast Management

Continuous

Forecast

Management for

forecasting,

replenishment,

promotions, new

product

introductions and

financial plans. It

supports all areas of

the business:

finance, product-

lifecycle, supply

Stores

Factory

Co-Packer

SuppliersRetailer DCSupplier

Fwd DCVISIBILITYEXTERNALLY AWARE

COLLABORATING

Stores

Factory

Co-Packer

SuppliersRetailer DCSupplier

Fwd DCVISIBILITYINTERNALLY FOCUSED

ANTICIPATING

Gartner’s 4 Stages to Implementing DDVN

POS Driven

Forecast

POS and Network

Inventory

Calculated

Replenishment

Stores

Factory

Co-Packer

SuppliersRetailer DCSupplier

Fwd DCNO VISIBILITYINTERNALLY FOCUSED

REACTING

Stores

Factory

Co-Packer

SuppliersRetailer DCSupplier

Fwd DCVISABILITY AND INFLUENCECOORDINATED INTERNALLY

ORCHESTRATING

Smaller Steps to Becoming Consumer

Driven

Increase Visibility by

1. Utilizing POS and shelf data

2. All nodes in the chain should be supplied with

customer demand.

3. More frequent down-stream communication.

Improve Planning by

1. Increased planning frequency

2. S&OP

3. Decrease the amount of stock pushed out to

stores

* lift from out of stock and forecast accuracy

improvements resulting in recoverable sales

† buffer = safety stock adjustment for reduced

uncertainty and information latency

1% – 4% improvement in

sales

Sales

traditional

model

Sales*

consumer-

drivenSALES LEVELS

CoGS

Headcount

Transportation

traditional

model

5% – 10% reduction in operating expense

CoGS

Headcount

Transportation

consumer-

drivenEXPENSE LEVELS

Forecasted

Demand

Promotional

Demand

Buffer†

traditional

model

20% – 30% reduction in

inventory

Actual Demand

Promotional

Demand

Buffer†

consumer-

drivenINVENTORY LEVELS

A consumer-driven approach achieves balanced cash flow through increased

sales, reduced operating expenses, and working capital improvements.

High Impact Results (US examples)

dedicated marketing integrated supply chain / sales force

Source: Reflects F10 Data

Del Montenourishing families, enriching lives, every day

Annual Revenues of $3.7B consumer products manufacturer producing canned

fruits/vegetables and pet food

• Retailer Order Forecast

• Deployment (DRP)

• Transportation Optimization

• Inventory Planning

• DC Capacity Management

• Automated Carrier Scheduling

1

2

3

4

5

6

• Contact Management/AVL

• Purchase Order Management

• Supplier Portal, Shipment, Invoicing

• Consignment and VMI

• CoMFG Planning, Order Execution

• EDI & Supplier Scorecarding

RETAILER PARTNER FOCUS SUPPLIER PARTNER FOCUS

RETAILER STORES RETAILER DCS DEL MONTE DCS DEL MONTE PLANTS DEL MONTE SUPPLIERS

CO-PACKERS

4 5 6 231

initial focus was customer order fulfillment and use of retailer data

incorporated transportation and appointment scheduling

migrated focus to production planning and supplier collaboration

Del MonteGrocery Eco-System

7

8

9

10

11

12

910

11

12

7 8

Network Capabilities Gained:

Improved End to End Network-wide Visibility – Store shelf to Production and Inbound Supply

Deployment Planning – Replenishment to forward DC based on actual demand

Incremental planning integrated with execution – Provides adjustment to execution with a change in demand – POS or PO

Decision Making vs. Decision Support – enables scalability while increasing the granularity of the planning parameters

Benefits For Del Monte:

Improved customer order fill rate to 99+%

Decreased inventory by 27%

Invested in strategic projects with 2 year payback

Received Supplier of Year awards and Gold status from multiple retail customers

Significant headcount reduction

Benefits For Their Customers:

Improved store in stocks to 99+%

Decreased inventory for Del Monte products by 30+%

Achieved negative working capital

“game changing” service

levels – WHILE lowering cost

and improving balance sheet

Del MonteWhat does high-impact look like?

Value of the Network Effect

Drive sales and revenue

Sense problems before they happen with predictive analytics

Collaborate with customers for demand forecast

Dramatically improve service levels and on-shelf availability

SaaS/Cloud means lower IT costs

Synchronize your real-time demand data eloquently with your

PLM for faster bring-to-market of new products

GROCERY CONSUMER GOODS ON ONE

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