FoodLogistics.com |

As the consumer packaged goods industry strives to become more demand-driven, independent wholesale grocers face a unique challenge. Literally caught in the middle between retailers and manufacturers, wholesalers lack the immediate visibility into consumer demand enjoyed by retailers. At the same time, unlike their vendors upstream, they have no direct control over supply.

As a result, the task of managing inventory and operations efficiently in a demand-driven environment becomes, for wholesalers, a high-wire balancing act. The key to success is in developing accurate demand plans.

“You can’t synchronize the supply chain without a demand plan in which you have a high degree of confidence,” says Karin Bursa, vice president of marketing at Logility Inc., Atlanta. In a demand-driven supply chain, the demand plan or forecast serves as the foundation for every other facet of the operation, including inventory management policy and optimized replenishment and supply plans, she notes.

With many wholesalers expanding their geographic territories today, whether through growth or acquisition, a disciplined approach to demand planning is more critical than ever. “They need to become more efficient to achieve the turns they need, while still maintaining huge product assortments,” she points out.

Yet for the majority of today’s independent wholesalers, driving supply off anticipated demand represents a radical departure. “Traditionally, wholesalers have operated from a purchase mentality. They’ve focused on making a good buy, getting a good price,” Bursa observes.

The kinds of purchasing incentives typically offered by suppliers “have historically led many wholesale distribution companies to make what are, in the long term, less profitable decisions,” she observes.

“Forecasting—conceptually, philosophically, programmatically and technically—is really very new to this company,” adds Chuck Palazzo, chief information officer at Associated Grocers of Florida, Pompano Beach, FL. “Even though some of our people may have had an idea of what forecasting and being demand-driven are all about, no one had any prior experience with a forecasting system. With no experience, people really didn’t understand the potential of what a forecasting system like Logility’s could do.”

Like most wholesalers, Associated Grocers relied, until recently, on a pick-based system, using order histories, set replenishment points and exception reports to trigger buying decisions. Most large CPG manufacturers, on the other hand, are well-versed in the science of prediction.