Forecasting failing, claims IGD

Millions of pounds are being wasted every year through inadequate demand planning and forecasting in the food industry, according to a report from grocery think tank IGD.

While a large proportion of food manufacturers surveyed by IGD had invested in IT systems to assist forecasting, almost half (46%) did not conduct any formal training on demand planning and forecasting, said the report's author Darran Watkins. Also, basic tasks, such as properly evaluating previous promotions, were not routinely carried out.

"In many cases, the problems are cultural," said Watkins. The IT systems are out there, he says, but they are not a panacea. "Successful promotional planning requires better communication, both internally and externally. It's about making sure that sales and production teams both understand what they are trying to achieve."

While some larger manufacturers had embraced the principles of collaborative planning, forecasting and replenishment, many smaller suppliers were not planning promotions effectively with trading partners, said Watkins.

Many also lacked the flexibility to respond quickly enough to changing demand patterns, with a significant number feeling that their sales and operational planning systems were not delivering.

"Suppliers want better and earlier information on required volumes, pricing and phasing, plus information on competitor activity and firmer range review dates for listings and de-listings," he continued.

However, poor information from retailers was not entirely to blame for poor planning, said Watkins. "There is actually a wealth of sales and inventory information out there [in web-based portals developed by supermarkets for their suppliers]. But many manufacturers struggle to utilise it in a meaningful or timely fashion, while the data is cut in slightly different ways."

There was, however, little impetus for retailers to standardise data on the portals, which were increasingly regarded as conferring a competitive advantage.

A lack of sales data from the independent retail sector also made it difficult for suppliers to know whether orders were linked to sales or to stocking levels in warehouses, making planning more difficult.

While techniques such as vendor-managed inventory were becoming more prevalent, the issue of who actually raised purchase orders was technically irrelevant if both trading partners had access to real-time, accurate data across the supply chain, which in turn powered automated replenishment systems.