Improving the demand-driven supply chain

A new set of supply chain tools will allow retailers to be more responsive to consumer demand, says Ron Riggin of Acuity Global.

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 6/21/2007

Any reporter who’s been in the business awhile has a few go-to sources. Those are guys or gals who look beyond the hype and tell you what’s really going on.

When it comes to supply chain information technology, Ron Riggin is one of Modern Materials Handling’s go-to guys. Today, Riggin is president of Acuity Global, a supply chain consulting firm. But we first got to know him during the Internet boom, when Riggin was chief technology officer of MARC Global. After MARC was acquired by RedPrairie last year, Riggin stayed on for a time as senior vice president of technology.

We recently asked Riggin what he’s tracking in the supply chain today. “There’s some pretty big shifts going on in the retail supply chain,” Riggin told us. “The big one is that CPG manufacturers and retailers alike are realizing that after years of talking about it, a demand-driven supply chain is something they need to understand and focus on.”

Demand driven supply chain

The idea of a demand-driven supply chain is a simple one. Instead of manufacturers loading up warehouses with what they think people will buy and then pushing that out to stores, product will be manufactured and pulled through the supply chain based on what customers are saying they want to buy from point-of-sale data in the retail store.

Instead of a focus on the DC, the focus is on the store. In the best of all worlds, manufacturers would bypass the DC all together and ship directly to the store.  

Now, that may not sound like big news. After all, retailers, supply chain consultants and software providers have been talking about this evolution for years.

But, as Riggin points out, it’s been mostly talk.

“Until now, we haven’t really had a way to create a demand signal repository for a retailer,” says Riggin. “That’s a way to collect, cleanse and aggregate retail point of sale data that can be used to forecast demand at the store level, and then present that information across the enterprise to drive supply chain operations.”

Information that can add value now

Over the last few years, Riggin adds, retailers have spent a lot of time and effort on RFID projects that they believe are going to solve that issue. He’s not convinced that’s the answer.

“RFID will be effective once it’s fully deployed and all the tools to make use of it are in place, but that won’t be for years,” Riggin says. “Meanwhile, there’s a wealth of information out there that can add value and be used now.”

What, then, needs to happen? Riggin sees two important changes. One is a new generation of applications for aggregating demand data from the point of sale.

“The mega-retailers here and abroad have created huge custom solutions to address the need for a repository for their demand information and for supplier portals,” says Riggin. “Now, we’re watching a new generation of demand-driven supply chain solutions that are readily available for all tiers of retailers.”

The second change is the next generation of forecasting, planning and collaboration tools to make use of that data both internally and with suppliers.

“I think what the big retailers are realizing is that they have really efficient supply chains already,” Riggin says. “At this point, improvements inside the warehouse through mechanization will be incremental. The real opportunity is to make your supply chain more responsive to demand or to eliminate the warehouse all together by shipping directly to the store.”

In both cases, Riggin says these new systems are built on standards-based Web services, also known as services oriented architecture or SOA, and are offered in an on-demand, subscription model, also known as software as a service. Both are relatively easy to deploy and affordable, which should promote their use by retailers.