Organisations dealing with producing, distributing, and making products available at the point of purchase (retail outlet) have an ongoing challenge; How to make the right product available at the right place and at right time?
The pressure of controlling inventory costs and still meeting sales targets makes the inventory management process very complex in such supply chains. These organizations continue to suffer from unavailability despite having high overall inventory.
Our experience of dealing with such organisations validates the effect of significant sales loss due to unavailability. Most of them are unaware of the quantum of lost sales, as lost sale is usually never reported. With many days of average inventory spread across stocking locations, many managers tend to believe their lost sales to be 2 to 3%. However, the reality is far from that number. While the average inventory looks high, the profile of inventory is highly skewed at individual SKU level. Most stock-out items are the high runners while the mathematical average is “jacked up” by the extremely high inventory of slow movers.
Such supply chains deliver limited ROI for the distributors. As a result, most dealers only work with a limited portfolio of products (do not have full range) and also put less efforts in effectively servicing and expanding the retail network. (Dealing with additional products and servicing more retail points puts strain on limited cash with dealers).
Many organisations have tried dealing with the problem (of having right inventory at right place and right time) by investing in better forecasting tools and IT infrastructure to get point of sale data. However, their core production and distribution process is the same old paradigm of “push” mode of operations practised since many decades. Vector has implemented rapid replenishment solution (replacing the forecast and push method) in entire supply and demand chain of consumer goods organizations to help them plug the lost sales, while reducing the overall inventory by more than 50%. Some of the organisations have achieved dealer ROI levels, one of the best in the country. Many have reported an immediate sales gain of around 30% after the implementation of the replenishment solution.
Improve availability to near 100% at point of sale while reducing the overall supply chain inventory to less than half of current levels.
Provide 100% availability at much lower inventory to the distributors (very high ROI, usually over 70%) and ensuring ~100% availability at retailers; while increasing range and reach.