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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ing the quality of forecasts is either important or very important, which indicates that retailers understand the value of these efforts. This is where the real heavy lifting by retailers must be done. The right system software capabil- ity must be coupled with the right business processes designed to deliver a highly accurate forecast that can be shared with suppliers. Suppliers can then work backward through the production-planning process to ensure prod- uct is available to fill the purchase order. From The Supplier's Perspective, What Are Retailers Doing To Improve Fill Rate Performance? While most retailers have made fill rate a com- pliance requirement, data in the chart below shows that some retailers are already taking important collaborative steps to improve supplier fill rate performance. The majority of suppliers said their retailer partners are work- ing to improve order forecasts, committing to forecasts before ordering, and sharing more sales and inventory data. However, commit- ment is a two-way street in a collaborative relationship. If a retailer is willing to commit to a forecast, a supplier should be willing to com- mit to a fill rate. The degree of variability tolerated in the order forecast by the supplier, as well as the actual purchase order quantity and upside or downside expected by the retailer to the order forecast, become a critical part of the collaborative negotiation between trading partners. As both partners plan together and get better at the forecasting process, this variability can be lowered, which will reduce financial risk and provide both partners with better inventory productivity. What's Keeping Suppliers From Improving Fill Rate Performance? Reductions in purchase order lead times, short shipping windows, low-quality forecasts, and the lack of an order forecast altogether are obstacles to better fill rate performance. Less available time from forecast to purchase order to required delivery date will strain the supplier's supply chain. Suppliers also admit that some fill rate problems are self-inflicted. Overselling their limited available inventory, and the way available inventory is allocated among retailers, can cause headaches. Suppliers confirmed they need high-quality forecasts from retailers to plan production and fulfill orders. Suppliers also need assurance that retailers will stand behind their forecasts. Otherwise, risk increases for both partners, but especially for suppliers. In a seemingly worst-case scenario, some suppliers responding to our survey said the biggest challenge to providing 100 percent fill rate is that forecasts are inaccurate, and retail- ers often place a purchase order that doesn't align with the forecast. In some cases, suppliers are then hit with a chargeback for a fill rate violation. This is a prime example of what col- laboration does not look like. Suppliers need an accurate forecast, and they need retailers to stand by that forecast, even if it differs from the final quantity they want. If the retailer writes a purchase order for less than the forecasted quantity, the supplier is left with excess inventory. If the retailer writes a purchase order for more than the forecasted Jul-Aug 2017 22 N/A Not Important Important Very Important Total Weighted Average Increase Supplier Attention/ Effort 5.88% 2 0.00% 0 35.29% 12 58.82% 20 34 3.47 Increase Merchant Attention/ Effort 5.88% 2 5.88% 2 55.88% 19 32.35% 11 34 3.15 Provide a Forecast 5.88% 2 5.88% 2 41.18% 14 47.06% 16 34 3.29 Improve Quality of Forecast 14.29% 5 5.71% 2 40.00% 14 40.00% 14 35 3.06 Reduce Changes Made to P.O. 11.43% 4 11.43% 4 45.71% 16 31.43% 11 35 2.97 Increase Compliance Requirements Around Fill Rate 17.65% 6 8.82% 3 44.12% 15 29.41% 10 34 2.85 Increase Ship Windows 17.14% 6 51.43% 18 28.57% 10 2.86% 1 35 2.17 Extend P.O. Lead Time 17.65% 6 44.12% 15 32.35% 11 5.88% 2 34 2.26 Please rate the importance of each of the following activities you may be using to improve fill rate performance. Retailers said

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