The role of supply chain management to better deal with uncertain demand and supply

The challenge: disruption in supply chain management

 

In a world where most countries have gone into some form of lockdown, from movement restrictions of people to cancelation or postponement of events as well as the closing of restaurants and bars. At the same time, retailers have been faced by a much higher demand, making Supply Chain solutions become the retail’s most valued ally. 

 

In this environment, the traditional “make-to-order” planning model has proven too slow to cope with changes in demand. However, the most innovative thinkers in retail have already been implementing collaborative models based on shared forecast-controlled stock buffers which has proven to be a better way to deal with demand changes.  This has been especially important for certain products such as wine which require long production and transportation lead times.

 

Historically, as wine shelves needed to be replenished, the retailer would place an order and then the producer would purchase the packaging materials and bottle the wine to fulfill this order.  The change in consumer behavior since COVID-19 has forced an obvious peak in retail purchasing.  Additionally,  the effects of the current crisis have directly affected transportation, causing severe service disruptions, an imbalance in empty equipment, resulting in surcharges, and increasing the lengthy international supply chain lead-time. The transport disruption combined with increased demand and the make-to-order process has jeopardized the order fulfillment which put on-shelf availability at risk.

 

The solution: shifting from make-to-order to make-to-forecast

 

Only those who identified the problem and implemented collaborative Supply Chain Management solutions, together with all their partners, are now able to accelerate the process of supplier-to-retailer and deliver the goods in the most efficient way.

 

 

Only when the wine is sold from the retail shelf, will it trigger the replenishment ordering and new production requirements. Therefore, on-shelf availability is not only a key objective for the retailer, but even more so for the wine supplier.  Achieving maximum availability is a common objective requires a joint effort: sharing information, building trust and making what is promised happen.

 

The results: enabling a “produce-to-forecast” model

 

The key to success is to leverage the demand forecast. The forecast does not only give a good understanding about future demand, purchase orders and shipments, but it also defines how much stock is needed to deal with possible fluctuations in demand. The retailer is in the best position to share this information with all parties involved in the supply chain. The forecast provides data to all parties: suppliers are then able to anticipate orders and the logistics service provider can anticipate the transport needs.

 

In the “produce-to-forecast” model, a stock buffer decouples the production process from the order fulfillment one.  This process facilitates stock being ready for shipment before the purchase orders arrive at the winery, minimizing the fluctuation in the lead-time. This will reduce the lead-time to almost pure transportation  and improves the responsiveness of the supply chain. Since the buffer stock is produced against the retailer's forecast, the retailer should commit to buying the stock that that has been produced.

 

Hillebrand understands the “produce-to-demand forecast “model and the importance of sharing information between the supply chain players. Being in the middle between retailers, importers, distributors and suppliers, “we are in a position to facilitate collaboration in the supply chain at both planning and execution level, to share information and coordinate the processes, which require very strict order fulfilment, an agreed process between all parties involved, including tasks, responsibilities, deadlines and milestones” .

 

In order to successfully achieve this, Hillebrand counts on a global network of local experts, as well as technological platforms to provide transparency and facilitate these processes.

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