It's good to talk

Effective demand planning for promotions continues to be scuppered by poor communications both within and between companies, according to a new study by market researcher Analytiqa.

Almost three quarters (72.4%) of supply chain directors at European consumer goods manufacturers interviewed for the study said that improving promotions demand management was top of their priority list, says Analytiqa analyst Liz Maffei.

However, many admitted that a lack of communication between the sales and production/planning functions within their own organisations caused almost as many problems as poor communication with customers, she says. "People seem to operate in silos. The sales team in Germany might say, 'We can do that', without knowing precisely whether the supply chain and production people are geared up to do it efficiently.

"If they are not, this may impact on the commercial viability of the deal in the first place". If the sales team commits to something without a clear understanding of the operational implications, margins are dented because the company ends up paying over the odds for agency staff or third party logistics support in order to keep customers happy, she adds.

Collaborative planning, forecasting and replenishment systems that generate alerts when stock levels move beyond pre-set boundaries had proved useful for some companies in the study, she says.

However, as the Red Meat Industry Forum's work with chefs at Beefeater restaurants demonstrates, simple solutions such as changes to ordering cycles are often all that is required. She adds: "IT systems are no substitute for collaborative working."

There was also a general feeling that more data was not necessarily needed to improve forecasting, she adds: "Businesses are already bombarded with data. What they want is actionable business information."

Managing residual stock at the end of promotions was also cited as a key problem for ambient manufacturers, who were keen to get more support from third party logistics companies in repackaging promotional goods.

For short shelf-life suppliers, the issue of who owns the forecast was more critical.

"If an order comes in well below forecast", says Maffei, "there are major commercial implications for short shelf-life suppliers, particularly in own-label, when goods cannot simply be re-routed to other customers."