Defining the role of supply chain, span of control and metrics maturity are the key enablers to demand-driven retail success, according to a recent survey by Gartner. The 2012 demand-driven survey was conducted from September through November 2012 across six retail segments in North America, Western Europe and Asia/Pacific.
Gartner defines demand-driven retailing as “a system of technologies and processes that captures consumer behavior at each point of interaction. It merges the business domains of demand, supply and product to fulfill customer expectations, improve operational performance and facilitates a timely, profitable response across a network of suppliers, employees and sales channels.”
“Demand-driven retailers balance operations and innovation excellence, while delivering an exceptional and profitable customer experience,” said Mike Griswold, research vice president at Gartner. “Retailers progressing along this journey realize a need for three key foundational elements that provide the platform for other demand-driven initiatives.”
The importance of these three key enablers is:
Enabler 1 — The role of the supply chain
This is a clear definition and alignment around the role of the supply chain to foster alignment with business strategy. The role of a supply chain will vary by retailer, potentially evolving over time. Organizations that see the supply chain as a source of differentiation tend to view their supply chain as more mature and playing a more strategic role within the company.
Enabler 2 — Supply chain span of control
Although the role of the supply chain may differ by retailer, leaders share one common trait — they define their supply chains more inclusively than their peers. Many retailers use a narrow span of control (such as distribution center [DC] operations, transportation and procurement) to define their supply chains. More-mature retail supply chains broaden the span of control to include forecasting, replenishment, new product launch and sourcing responsibilities.
Enabler 3 — Establishing a robust set of end-to-end supply chain metrics
Many retailers today measure aspects of their supply chains, but see a need for a more-comprehensive measurement program. Supply chain leaders understand successful performance measurement takes two things: determining the right set of metrics and understanding how to use those metrics to optimize performance across the value network. The key is to focus on the few critical metrics that really matter.
Once the foundations have been established, the survey found that promotional and new item forecasting is the primary challenge for demand-driven retailers. Increasing and changing shopper requirements puts incredible pressure on demand planning capabilities.
According to the survey, at least two-thirds of respondents identified base, promotional and new item forecasting as “extremely important” to their organizations. Yet, despite the growth in e-commerce, only 59 percent of respondents cited multichannel forecasting as “extremely important.” This highlights a continuing disconnect that must be addressed for retailers to deliver improved order fill rates and inventory productivity.