Best Practices from Kurt Salmon
Many retailers are striving to better respond to changes in consumer demand, and it’s easy to see why: They’re pressed to reduce inventories and cut supply chain costs at the same time that the shopping patterns of American consumers have become virtually impossible to predict.
Making matters even more complicated, consumers now have unprecedented access to an infinite number of products and a virtually limitless number of places at which to buy them. They expect to be able to buy exactly what they want exactly when they want it, and if one retailer can’t make that happen, another one (or a dozen others) can.
That’s where a demand-responsive value chain comes in. By shortening cycle times and increasing collaboration across the value chain, retailers can ensure they have the right product, in the right place, at the right time.
1. Shortening Cycle Times
Many retailers are beginning to move production closer to home (leveraging data to inform smarter decisions on the best manufacturing locations) as a way to shorten cycle times. Shorter cycle times can improve responsiveness to demand and increase inventory effectiveness.
The global product margin metric measures the cost from each point of manufacture to each point of distribution and the unique retail price from that point of distribution. Keeping this number in mind allows retailers and wholesalers to optimize total margin by choosing the best manufacturing locations based on discrete costs from multiple points of supply to multiple points of distribution and the retail price at each point.
But after a retailer’s sourcing decisions have been made, there are still several steps that can further decrease cycle times. [Read more...]