Getting Serious About Supply Chains
Bare shelves have become an all-too-often sign of poor replenishment planning and single points of failure in retail supply chains.
If there’s anything the past few years have taught observers in the retail industry, it’s that we have to adopt an aggressive no-tolerance policy against single points of failure in our supply chains.
For example, the 2021 obstruction of the Suez Canal by the 400-metre-long container ship, the Ever Given, created a six-day backlog of over 350 cargo vessels carrying an estimated US$9.6 billion in commerce. The aftershocks of this trade crisis are still felt in some cases, including long replenishment delays, increased demand, and ultimately a dramatic rise in prices.
More recently, the ravages of climate change and extreme weather are threatening entire crops, as well as our consumer expectations of having everyday goods on our store shelves. Just this month, the United States Department of Agriculture announced that Florida orange crops will reach a historic 79-year-low following the devastation wreaked by Hurricane Ian.
As if these external forces weren’t chaotic enough, the retail business in particular has its own set of highly-volatile variables to consider. In market segments like fashion, we contend with seasonality of stock and the rise and fall of consumer trends exemplified in the phenomenon of fast fashion, in which manufacturers rush to quickly imitate a design gone viral from a celebrity TikTok post, for example. These items fly off the rack as fast as they arrive. In the retail grocery market segment, we face the timeliness inherent with perishable goods that have a limited shelf life before they’re desirable (or even edible).
This leaves margin-minded retailers facing a particular challenge: how to maintain stock quantities under such unpredictable circumstances. Replenish too little or too late, and you risk understock scenarios that erode consumer confidence, resulting in lost sales. Replenish too much or too soon, and you risk overstock scenarios that gobble up profits.
These truly complex challenges require intelligent solutions, such as the Predictive Planning and Inventory Orchestration suite of supply chain planning applications emerging from SAP’s Industry Cloud. This suite includes SAP Predictive Replenishment, modeled around a holistic, cost-optimal ordering algorithm which automates a trade-off between lost sales from understocking and lost profit from overstocking.
The entire technology infrastructure is modeled after world-class cloud resiliency principles, safeguarding the entire mission-critical replenishment process against unpredictable technical failures.
Released in Q3 2022, SAP Predictive Replenishment features:
- Integrated planning processes, leading to higher demand calculation accuracy
- Demand input based on store order forecasts, leading to more accurate results
- Flexible objective setting, allowing for a wider range of control over order proposals
- Full transparency into calculations using SAP’s award-winning user experience
- Intuitive, guided action items, leading to more planning and less firefighting
- Intense vendor collaboration options, leading to greater supplier reliability and fewer unexpected changes
Under the hood, SAP Predictive Replenishment benefits from all the speed, scalability, and resilience you’d expect from SAP’s Industry Cloud. In terms of real-world problem solving, our sophisticated data science algorithms optimize availability and replenishment forecasts across a dizzying number of potential demand influencing factors using complex statistical analysis. These resource-sensitive artificial intelligence calculations are further optimized for a very high throughput by leveraging modern hyperscaler network topologies, which translates to a faster response time for retailers based on the most recent possible data. Finally, the entire technology infrastructure is modeled after world-class cloud resiliency principles, safeguarding the entire mission-critical replenishment process against unpredictable technical failures.
Together with SAP Order and Delivery Scheduling (released in Q2 2022) and SAP Predictive Demand Planning (expected in 2023), these applications elevate merchandising and supply chain planning processes, providing more accurate planning and demand prediction, with a superior resiliency and agility when things do not go as planned.
Learn about SAP’s set of industry cloud solutions for predictive planning and how they bring future-ready performance to your strategy for more efficient, sustainable and profitable retail operations.
For more information on some of the retail industry cloud solutions, take a look at Daniela Khalaf’s blog post which goes into further detail.
I’d love to hear your retail supply chain experiences: as a shopper, an employee in the retail sector, or an SAP customer. Drop us a comment and let us know how these past years have impacted you.