‘Digital transformation’ is becoming something of a cliché these days.
There is no question that information technology and digital has improved supply chain operations. For example, given availability of the right data, materials and inventory planning can just about be automated these days.
The key data set in supply chain planning has always been the sales forecast. Experienced sales forecasting and commercial professionals have long suffered the wounds of inaccurate forecasts with the planners soon following suit – “the problem is the forecast …. It is always inaccurate”. I’ll return to this later on.
This brings me to route to market which is beginning its own IT and digital journey. There are now a number of RtM technology offerings that in effect link the producer to the distributor and the Point of Sale (POS).
Why is this important?
Consider these four nuggets of data.
- POS Sales
- POS Stock
- Distributor Sales
- Distributor Stock
Now bear with me. If we (we being a distributor or a producer) know what is sold at the point of sale, and we know POS stock levels, then we know what stock needs to be replenished at the POS by the distributor.
Likewise if we, the producer, know sales from the distributor to the POS and distributor stock, we know what stock we need to replenish at the distributor.
In theory this is simple. In practice it is a challenge, not least in markets where the trade is dominated by a huge number of traditional trade outlets and other wholesaler intermediaries. In fact in these type of markets, the technology is arguably the easy bit.
Now back to the supply chain. Each of these four data points represent a demand signal for the distributor and producer. So, if we, the producer, can plan our supply chain and route to market armed with these data, we will be able to supply our end customers and consumers at the highest possible service levels, at the lowest possible cost to serve and with minimal working capital tied up in inventory.
Just imagine? Now that is a Digital Transformation.
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