A recent article over on SupplyChainBrain on five key lessons e-Commerce merchants can learn from the 2010 holiday season identifies some key supply chain requirements for a successful holiday season that all retailers should keep in mind.
- Holiday Shopping Starts Early
It is now stating well before Black Friday, so your outbound supply chain should be ready to ship as soon as Halloween is over. This means that you should already be starting to build up inventory for products expected to be in high demand.
- Cyber Monday Matters, but don’t ignore the rest of the week.
Shoppers are looking for deals all week. Be ready for a consistent demand.
- CyberWeek is big, but the following weeks are bigger.
Orders increase as shipping deadlines approach. Be ready for a lot of orders, and a lot of outbound shipments, as close to your shipper’s cut off dates as possible.
- Average ticket declines are not necessarily a bad thing.
Especially when volume increases, which is the current trend.
- Vertical Markets Matter
Apparel, Shoe, and Toy sellers increased market share, and may be on a trajectory to do the same this year.
In other words, you need to
- Prepare for early demand
- that will increase steadily until the shipping deadlines
- when you will have to be prepared to ship a large amount of product very quickly and deliver on time.
In Monday’s post, we presented JDA and Oliver Wight’s 10 myths of S&OP planning, as laid out in recent white paper. Yesterday, we presented their 10 realities of S&OP planning. Today we review the myths vs. realities and offer our own verdict on the first five myths and realities.
- Myth: S&OP process should be owned by Supply Chain.
Reality: S&OP is an executive process that must be executive-owned and led.
Verdict: It definitely must be executive owned, but it should be CPO/CSCO led. Supply Chain has to get the goods in and ensure they are pushed out to where sales and marketing needs them, when they need them. And Supply Chain has the most to lose by not ensuring the process goes smooth. The CEO won’t have the time, the CFO will focus on cost, and the end result could be that no department will have their needs met. The CMO will be overconfident and / or overly risk averse and build up too much inventory. The COO (Product Management) will be overly focussed on product quality and not product delivery. And so on.
- Myth: S&OP is a tactical real-time process.
Reality: Advanced S&OP is an aggregate planning process that occurs monthly.
Verdict: S&OP must look at the aggregate, must look out into the future, and must be strategic, but it must also look at the high-volume items, must treat the short-term and long-term differently, and must adapt in near real time if need be. And monthly is not appropriate for fast moving / short life span consumer goods such as seasonal apparel, cell phones, and trend-based products. S&OP for fashion must be done weekly, over a three to four month sales window. Cell phones must be done weekly, especially just after launch, over a three to six month window. Etc. And if a major campaign is launched, or a competitor releases a brand new product that goes head-to-head with yours, the plan will need to be immediately revisited.
- Myth: S&OP doesn’t dive into the details.
Reality: Aggregate plans from S&OP are translated as necessary into detailed product management plans.
Verdict: This is correct. For low-volume items, or items with steady, level, sales, plans will not need to be revised or detailed often. But for fast-moving consumer goods, detailed plans will be required. This reality is on target.
- Myth: S&OP is really just a review of historical data.
Reality: S&OP is a fact- and assumption-driven process, not a numbers-driven process.
Verdict: WTF? Are they serious? Not a numbers driven process? The facts must be numbers based (such as, we have historically sold 100K cans of paste a month and we expect this new marketing campaign to increase sales 20%). Facts are based on data, and data is numbers — not gut feelings. And assumptions are based on upcoming actions, that are expected to impact sales — a number — in a definitive way. Plus, you NEVER ignore historical data. It’s your baseline. If nothing were to change, your sales would stay the same. This reality is from another dimension.
- Myth: S&OP is limited to quantitative views of supply, demand and financial plans.
Reality: Fact and assumption management and the qualitative aspects of S&OP are more important than the quantitative aspects.
Verdict: Again, WTF? I don’t get it. The whole point of S&OP is to come up with a sales plan that dictates expected demand over time to allow supply chain to define detailed volume and delivery timelines. This is extremely quantitative. And assumptions might need to be altered over time, so a baseline is needed to test what the impacts of an alteration would be. This reality is also from another dimension.
Tomorrow’s post will tackle the last five myths and realities.