Innovative Retail Technologies

JUL-AUG 2017

Innovative Retail Technologies (formerly Integrated Solutions For Retailers) is the premier source for innovative yet pragmatic technology solutions in the retail industry.

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Fill Rate Challenges For Retail Trading Partners O ptimal supply chain performance delivers speed, accuracy, and visibility. Retailer efforts to improve perfor- mance initially focused on many activities that suppliers could handle internally without significant retailer time and expense, such as EDI, ASN, on-time delivery, packaging, and labeling. This was low-hanging fruit. The work done by suppliers yielded speed, efficiency, and lower expenses for retailers and were support- ed by scorecards, communications, and often compliance programs to drive adoption and recover even more expense. However, these ef- forts did little to improve fill rate performance. Providing full fill rate has proven to be much harder for suppliers to resolve on their own. Fill rate performance improvements require sup- pliers to get much better at planning produc- tion. This requires high-quality retailer forecasts and commitments to those forecasts. The ability to close the sale every time because the exact item the customer wants is available for purchase, in the store or on the website, is a high priority and constant chal- lenge for retailers. Purchase order frequency, store replenishment frequency, safety stock levels, and consumer demand variability are all factored into the equation by retailers when determining the right quantity to order to ensure optimal in-stock inventory. If a retailer provides the merchandise sup- plier with this quantity information far enough in advance of issuing a purchase order, the accuracy of the forecast becomes an important part of the collaborative effort to improve fill rate performance. If not, the lack of a forecast, or a poor forecast with a high level of volatility, becomes a weakness and a less dependable planning tool for suppliers. Although some retailers have solid forecast- ing capability, it appears many others have significant work to do. These retailers must address their internal IT systems and business planning processes to create a high-quality forecast that can be shared with suppliers as the first real step toward collaborative improve- ment. Regardless, many retailers already have scorecarding and compliance in place to force improvements from their suppliers, but this approach alone cannot solve the problem. Retailers have made it clear that fill rate performance from their suppliers is not where it needs to be, and suppliers have made it clear that major obstacles must be overcome to achieve the necessary improvements. This spring, RVCF took a high-level look at the cur- rent challenges faced by retailers and suppliers as they work toward their mutual goal of full fill rate of purchase orders. A Retail Value Chain Federation (RVCF) survey sheds light on how to drive fill rate performance improvements. BY VICTOR ENGESSER I RETAIL EXECUTIVE ADVISOR RVCF Jul-Aug 2017 20 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% 74 suppliers said 35 retailers said Across all your relationships with regard to performance, how big an issue is fill rate performance in your overall trading partner relationships? Very Low Low Average High Very High Very Low Low Average High Very High What's Next

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