Forecasts are getting worse not better and will continue to get worse, Gavin Chappell, supply chain director of Asda, warned delegates at a retail supply chain conference yesterday.
Chappell was highlighting the importance of agility in retail supply chains in the face of growing complexity and the increasing number of factors that affected forecasting.
“We have to find different ways to construct supply chains to take that into account.”
And he gave examples of the unpredictability that could arise in retailing. In one example, he said that Easter soft drinks sales at one store had been twice the level of those at another store ten miles away.
Speaking at the Retail Week Supply Chain Summit in London, Chappell said lack of agility could stop a retailer supplying the freshest produce or frustrate customers in accessing the newest product lines.
Chappell quoted a statement on ‘known knowns’, ‘known unknowns’ and ‘unknown unknowns’ made famous by former US secretary of defense Donald Rumsfeld (1.).
He highlighted some of the areas of ‘unknown unknowns’ in retail supply chains – true vendor production capacities; supply chain stability (labour, trucks, manufacturing plant and equipment).
‘Known unknowns’ included what is going to happen to the weather, and the actual performance of promotions.
Overall, he said: “There are more ‘unknowns’ than ‘knowns’.”
Despite the problems involved in forecasting, Chappell was clear that agility could not be used as a replacement. “We have to continue to do proper planning,” he said.
And he went on to talk about some of ways that agility could be improved including:
* Asking vendors to work on a “day one for day two” basis to reduce the time from order to delivery.
* Seven day a week inbound. Stores work seven days a week so why should distribution centres be closed at weekends.
* Manufacturing for agility. Manufacturers focused on capacity utilisation but increasingly they needed to move towards more lean and agile manufacturing runs.
* Greater flexibility in the use of transport.
(1.) Rumsfeld said:
“There are known knowns; there are things we know we know.
We also know there are known unknowns; that is to say we know there are some things we do not know.
But there are also unknown unknowns – the ones we don’t know we don’t know.”
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