Recently, KANE completed research to identify the biggest barriers to retailer-supplier collaboration. We measured nine key areas of supply chain collaboration and asked both suppliers and retailers to measure how well their partners performed. To learn more, read the full research brief: Retailer-Supplier Collaboration.
The objective of the research was to determine the areas where retailers and their suppliers were least aligned and to better understand how to improve alignment and future collaborative distribution. A number of attributes were measured, from simple communication to technology capabilities, and the poorest alignment was clearly in the area of retail forecasting – both accuracy and timeliness. On a scale of 1-10, retailers rated their own capabilities around a 7.35, while suppliers rated retailers in the 5.50 range.Retail forecasting has been a lightning rod issue for decades. Various programs, from VMI to CPFR, have failed to minimize supplier frustration. Comments from suppliers during the research interviews point to several areas of frustration when it comes to forecasting:
Inaccurate retail forecasts
- “Retail projections for the most part are not reliable, which makes it very hard to try to get ahead and build up stock. You end up getting burned. There’s not much discussion when they stop ordering and we’re stuck with the inventory.”
- “We see poor demand forecasts and then unrealistic expectations on delivery once orders are placed.”
- “By giving suppliers access to actual demand and consumption data down to the store level, we could eliminate or reduce the inventory stockpiles across the supply chain.”
Inadequate lead time in retail forecasting
- “We need to know their inventory levels and demand with enough lead time for our production.”
- “Retailers should plan and make decisions as far in advance as possible.”
- “Better planning, especially looking ahead in daily/weekly orders, can enable cost-saving shipment consolidation, which is not happening today.”
- “We need to communicate more and be honest with each other – more transparency.”
- “Let’s work it out together. Educate both sides of the table with no finger pointing or defensiveness.”
There’s no easy answer to getting forecasting right. With all the technology available, it’s still hard to predict consumer behavior. But one thing’s for sure: improving the reliability and timeliness of retail forecasting would be a huge plus for suppliers, who want to avoid over-production and costly liquidations if items don’t sell.