By Tzveti Rainer, Manager CPG & Retail Industry Support, Datalliance
Collaborative replenishment is a hot topic in consumer goods as manufacturers look for ways to add value through collaboration and to be better business partners. But not all trading partners are actually doing it yet -- at least not in apparel and other soft goods. It's a time-tested process in consumer package goods -- virtually all of the larger CPG companies have been doing collaborative replenishment with major grocery, drug, dollar and mass retailers for years. And over the past 10 years, the practice has become commonplace in a wide range of B2B markets where products are typically sold through wholesale distributors; e.g., electrical products, plumbing products and aftermarket vehicle parts. But some retailers and their apparel suppliers have been slower to adopt the practice, in part because they think it is much more difficult to handle products with a variety of styles, colors and sizes sold at so many store locations.
Now, it is true that the concept of continuous replenishment is not particularly applicable to seasonal fashions. But for products that are more stable season to season (and even more so for certain styles and colors), replenishment is the sensible way to think. Products that work well in this model are basics like underwear, socks, accessories, work clothing and shoes, a selection of athletic clothing and shoes, men's casual slacks and men's classic shirts just to name a few of the more obvious categories. Given the right technological tools, all of these types of products lend themselves to a replenishment mindset -- especially when done on a collaborative basis.
In case you are not familiar with collaborative replenishment -- what many call Vendor Managed Inventory (VMI) -- the process is simple and well established. The retailer sends the supplier daily or weekly store-level activity data -- demand and inventory data that's usually sent in the form of an EDI 852 record. The supplier uses that information along with jointly developed store planograms, assortments and desired shelf presence as well as their internal information about promotions, upcoming product changes and shipping factors to calculate a weekly replenishment quantity. Each partner contributes the information that only they have (demand from the retailer and product from the supplier) and the supplier takes responsibility for managing each store's inventory of their brand-specific products within the agreed upon framework.
When trading partners do a good job of jointly defining the basic parameters and what they expect of each other, collaborative replenishment is a thing of beauty. It takes a large load off the retailer's buyers and enables the supplier to effectively ensure the right level of product availability week after week.
With apparel items, the range of SKUs to manage across the combination of styles, colors and sizes does create a challenge. But a good replenishment system will make it easier than it might seem. This is because it should be based on the retailer's store planograms.
Take men's casual or work pants for example. The supplier should be able to simply establish a minimum and maximum shelf presence for each style/color/size SKU and for each store's full item group (picture a slacks display fixture in a department store). Using the activity records provided by the retailer for each store, the replenishment system should be able to calculate the quantity of each SKU to ship to keep that particular style/color/size within the desired shelf presence. After each SKU quantity is planned individually for a given store, the system should then have the intelligence to determine if any additional quantities of the right SKUs should be added to the order for predicted sales. To further enhance efficiencies, the supplier is also able to set up varying assortments for different sizes or types of stores operated by the retail partner, which reduces assortment management complexity. In this system, suppliers also have tools to help manage demand seasonality and even assist during the rare replacement of a style.
Forward-thinking retailers and suppliers are beginning to ramp up today and having notable success. For example:
- A men's casual slacks supplier with a national department store retailer
- A work clothing supplier with national and regional department store retailers
- The largest independent wholesaler of DVDs, CDs and video games in North America with thousands of large and small retailer locations
- Multiple athletic sock suppliers with a national sporting goods retailer
With today's available system capabilities, it's pretty easy to keep the right assortments on store shelves week after week when trading partners are working together. Everybody wins with reduced out-of-stocks, rapid inventory turns and low administrative costs. That includes the retailer, the supplier and most importantly, the consumer.
About the Author
Tzveti Rainer is Manager, CPG and Retail Industry Support in the Datalliance Customer Care group. Tzveti and her team are responsible for assisting consumer products suppliers and their trading partners with the use of the Datalliance platform to support collaborative replenishment. Tzveti has numerous years of technology and services support in the U.S. and Europe. You can learn more about Tzveti and follow her at https://www.linkedin.com/in/tzveti-rainer-729662b