Connecting the Demand-Driven Dots

Mr. Masson, It has been my observation that wholesale distibutors have been the weak link in the supply network. Connectivity issues and questions of data security have created a bottleneck where local distributor stocks are involved. How do you see this being addressed in the future?

services to independents -- for example over 15% of grocery in the U.S. is still provided by this process.

However, while it takes two weeks for consumer products compnaies to sense retail channel demand, it

takes six months to sense wholesale distribution demand.

Clearly WD is a barrier to becoming demand-driven. The prime reasons why there are both delay and lack of consistency in the demand signal from WD are:

• WD doesn't have any authoritative control over POS (Point of Sales) data from its retailer/customers. They can't insist they get the sales data back, and it's hard to offer incentives to retailers for this data if there isn't a direct benefit to the retailer.

  
  

• WD has spent far more money on tactical supply chain execution systems to manage logistics (their core business) then they have on the

  supply chain planning side. This means they don't have the sophisticated data warehouses or demand planning systems that would provide the near

  real-time translation of demand that demand-driven companies are looking for.

The problem of demand visibility isn't unique to grocery -- other WD channels in retail have the same problem. One home hardware (do-it-yourself supplies) chain only gets POS data from 2200 of the 4100 stores that carry its brand. That amount of incomplete data doesn't provide the demand trends required to provide insight to WD suppliers.

But 7-Eleven provides some indication of how to deal with the problem; 7-Eleven only has franchisees but it won't sign an agreement with a WD that doesn't

require (a) it to use 7-Eleven store systems, and (b) to receive sales data 100% of the time.

So how should we address the poor visibility of demand in the retail side of WD? According to AMR Research's Director of Retail, Scott Langdoc, it's pretty simple:

• WD contracts with retailers should provide for collection of anonymous POS sales data in a standard format (preferably ARTS) so that they can simulate the same kinds of demand signals seen by the large

  Retail chains

  
  

• WD players need to increase investment in supply chain planning and automated replenishment systems, though this will require FMCG to accelerate adoption of perpetual inventory systems (which they aren't

  good at today in general).