Responding to Shopper Trends

The consumer goods industry strives to move from forecasting to demand planning for the supply chain, Procter & Gamble has emerged as a leader with its Consumer Driven Planning Initiative, or CDSN. The goal is to gain greater flexibility and faster responsiveness to shopper trends by learning in real time what shoppers are buying. But the path to that goal will be a long one.

Dirty Data
"The whole industry is moving towards leveraging demand, and POS data is the most readily available kind of demand signal," says Kara Romanow, consumer products research director at AMR Research. "It's a huge issue, because every retailer's POS formats data differently, and some do it daily, weekly, etc. It's ridiculously dirty data." According to Romanow, there are four key uses for retail POS data. The first is for account-level sales-type activity to monitor promotions and what sold or didn't sell. The second is to develop forecasts for demand planning applications ("Which is a shot in the dark anyway," she says.). The third is for specific collaborative relationships like CPFR and VMI. "The key technology players for these first three tactical uses are Demantra, Logility, Prescient, Manugistics, and SAP," says Romanow.

The fourth use for retail POS data is a strategic one, which is growing in importance for the future of the supply chain. "Consumer goods firms are leveraging demand signals -- any downstream demand data, including POS -- so that product is pulled versus pushed through the supply chain. For this, there's POS data, IRI or Nielsen syndicated data, EDI transaction-based data, and, later, more RFID data," says Romanow.

The problem with this strategy is that a majority of companies have completed the first three steps. But since all of the data resides in silos, the problem of how to manage the data becomes apparent. "Some suppliers have databases built specifically for Wal-Mart, Target and CVS," says Romanow. "One of the best examples of No. 4 is Procter & Gamble, with their Consumer Driven Supply Network (CDSN)."

Moments of Truth
Procter & Gamble (P&G) has reengineered its business model, its corporate mindset and its supply chain technologies around the consumer's two "moments of truth": when they choose the product at the shelf, and when they use the product in the home. Quality products determine the success of product use, but a demand-driven supply chain is needed to ensure the product is always there to be chosen at the shelf.

Data gathered by scanners at the POS forms the basis of P&G's Consumer Driven Supply Network (CDSN), which is driven by demand, not forecasts. The goal is to gather real-time information on the demand in order to create the supply to refill the shelves. "CDSN is P&G reinventing our supply network from the shelf back to win with consumers at the first and second moments of truth," says Milan Turk, director of customer e-collaboration for P&G Global Operations. "Focusing on the consumer using the product and the shopper having a positive shopping experience, those are non-traditional ways of thinking about the outcome of the supply network, and are measurable outcomes of a productive supply network."

Objectives of this operating strategy include reducing out-of-stocks at the shelf, inventory in the supply network, response times from shopper purchase to replenishment, and operating costs. The roots of this initiative go back one and a half years and it is gaining momentum, according to Turk. "For our retail customers, CDSN is about business growth from better meeting the unique needs of shoppers in their stores, and creating joint value creation opportunities with our retailers through better responding to shopper needs. Hence the name: the 'Consumer Driven Supply Network'."

Growth of Collaboration
Turk predicts ever greater levels of collaboration between retailers and manufacturers in the future. "In five years' time perhaps, the supply network will have been proven as a key means for creating shopper and consumer satisfaction. I think the Global Data Synchronization effort and the Electronic Product Code (EPC) are both examples of technologies and systems improvements that allow us to operate that supply network more efficiently. They both improve information flows between trading partners and improve visibility in the supply network. Visibility is the cornerstone of CDSN."

Paul Shultz, vice president of Consumer Business at Hitachi Consulting, agrees that the RFID movement behind EPC has illuminated backward into the supply chain. "You're going to see faster adoption of some better demand planning techniques now. Freezer management at the retail store should be possible, and case-level RFID has enabled track, trace, and recall for food safety, with the ability to see transactions all the way back through the supply chain," explains Shultz. "The glory around POS data is the ability to synchronize demand and supply better with real-time information--for today's sales to be restocked on trucks tomorrow morning."