Supply Scan

News & Trends from Across the Food Supply Chain


» Study Finds Consumer-Driven Supply Chain Is Becoming A Reality

The consumer-driven supply chain is beginning to become a reality in the food industry, according to a study conducted by Kurt Salmon Associate (KSA).

“The gaps are beginning to shrink,” said Jack Horst, a principal with KSA. “The supply chain itself has been elevated to a very different realm then it was 10 years ago. Back then, tactile issues were in the way. This year, we saw the elevation of the supply chain to the main stage in your companies.”

Horst presented the results at the first-ever joint Supply Chain Conference under the auspices of the GMA-FMI Trading Partner Alliance (TPA), held in Phoenix earlier this month.

The survey, 2010 Survey of Collaborative Supply Chain Effectiveness, was commissioned by the TPA under the framework of the “New Ways of Working Together” program. It illuminates new initiatives and operating models that can help trading partners improve supply chain efficiencies to their mutual benefit.

This is the first joint industry supply chain study since 2001, when KSA conducted a similar survey, and served as the basis for much of the collaborative industry work done in the nine years since.

Key findings include:

• Significant progress has been made in the definition, development and deployment of the fundamental building blocks supporting a consumer demand driven supply chain will lead to improved shelf service levels.
• Virtually all retailers and suppliers are investing as never before to more scientifically and collaboratively understand and react to the needs of the end consumer.
• Advances in understanding end-to-end item profitability have led to increased private branding, market localization and an increased focus on expanding the ways the industry interacts with customers.

KSA has coined the phrase “info-relationships” to capture the essence of successful retailer/supplier relationships of the future. “In this year’s survey, we see retailers and suppliers on the verge of leveraging all of the foundational building blocks that will finally allow us to exploit the power of crystal clear consumer demand information,” said Horst.

He added that grocery market share continues to fragment across an increasing array of channels, putting pressure on traditional grocers from every angle. “This hyper-competitive environment drives the need for more creative approaches resulting in the delivery of enhanced shopping experience without increases in price.”

In addition, the past decade has witnessed advancement of strategic and tactical systems and processes. As companies transition from home grown “host” systems to more robust enterprise resource planning systems (ERPs), “we are finding more trading partners sharing access to a broader set of foundational information supporting the next generation advances in collaborative supply chain operations,” said Horst.

Investing In Technology

The survey revealed the past eight years have seen a focus on strategic systems investment. Several respondents indicated that they had been consumed over the past several years dealing with the “haze” of ERP implementation and were now just starting to investigate how to leverage the power of the new tools they had deployed.

“Investment in enhanced demand planning and forecasting tools was repeatedly mentioned as a high priority initiative across the vendor community despite frustrations in the perceived ability of retailers to provide necessary data to efficiently fuel these applications,” said Horst.

In the retail community, computer assisted ordering (CAO) stood out as one of the most beneficial system investments companies can make. While few retailers had a CAO in 2001, a majority of this year’s respondents have either deployed CAO or plan to do it in the short term. Where implemented, the benefits of CAP were reported to be significant and consistent, including reduced inventory, increased turns, reduction in out-of-stocks and sales lift.

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