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Smarter Solutions for Retail: Optimal Replenishment Model

Gabriel Mesas, Associate Partner IBM Global Business Services Spain Supply Chain Visibility and Optimization for a smarter planet. Smarter Solutions for Retail: Optimal Replenishment Model. Agenda. 1. Bisuness Issues. 2. Transformation Enablers. 3. New Replenishment Model. 4.

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Smarter Solutions for Retail: Optimal Replenishment Model

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  1. Gabriel Mesas, Associate Partner IBM Global Business Services Spain Supply Chain Visibility and Optimization for a smarter planet Smarter Solutions for Retail: Optimal Replenishment Model

  2. Agenda 1 Bisuness Issues 2 Transformation Enablers 3 New Replenishment Model 4 Implementation Approach 5 Benefits Delivered 6 References

  3. Logistic Flow Logistic Flow Replenishment Flow Replenishment Flow Pressure to reduce stock without integral vision Promotional activity not inegrated in logistic model Complex operations and planning in DC and WH High proportion of manual replenishment Planners focus on problem solving Logistics responsibilities spread across departments Business Issues Map:Traditional Supply Chain Replenishment model: Issues and Volume Average retailer: 80.000 products / 500 stores / 10 DCs = 400 Million Decisions daily 3% of total sales profitability SUPPLIERS DIST. CENTER REPL. WAREH. STORES Automatic Replenishment Manual Replenishment Replenishment System

  4. Suppliers Store 3 Distributors Catalog DCs Store 1 Warehouses Carriers/3PL Call Center Web Customs Store 2 Customers Banks Retailer 1. Pressure in SC for 50 years:Still room for improvement Turn store demand into DC demand Automatically generate accurate store orders Automatically generate accurate DC orders Forecast customer demand accurately Plan best transport options Pressure to reduce stock without integral vision Level Stock to minimise waste Plan, Forecast & Scale capacity to actual needs Incremental improvements dried out. Supply Chain Transformation towards integration is required for significant leap.

  5. 2. Transformation Enablers:Unprecedented power allows Supply Chain Integration DIAGNOSE OPTIMIZE & LogicTools Inventory Analyst ILOG C-PLEX Optimization Engine

  6. 3. New Replenishment model proposition Vision of an Integrated Supply Chain Block 4: Realign Responsibilities along Organization Block 3: Empower IT Block 2: Streamline Satellite Processes Assortment & Catalog Management Promotion Management Capacity Management at DC & RW Store Operations Block 1: Integrate Core Processes Demand Forecasting Inventory & Replenishment planning Replenishment Management Warehouses Management Picking, expeditions Integration of the forecasting sales Stores & DC Master Data Management Import-Export

  7. 3. New Replenishment model proposition Optimizing in practical and mathematical terms 4 Integrated Optimization Store Replenishment Daily Sells Regular Orders 1 Ordering Forecast Forecast Ilog - CD 5 Order Quantity Forecast Promotional history Promotional Order Capacity Constrains 2 Formula Promotional Index Promotions Auto – approval strategy Exceptions Flow-Through Orders 3 6 Other demand flows Flow-Through Order Consolidation Order Approval Cicle Order EOQ

  8. Roles & Responsibilities Simplification Process Simplification Business Model Simplification Redefine the store role as expert in the client but not in the replenishment Move stock upstream (Rick pooling effect) Redefinition of Stock Responsibilities Leadership and establishment of cost objectives Put together the assortment definition & logistic model Synchronize replenishment and logistics Optimal logistic model definition Use order forecast of store to pilot the supplier replenishment Define KPIs to control the SC in an integrated way Work by exception not by checking every order Flow-through with Suppliers Simplification by logistic category Automate the order forecast in stores Integrate capacity constrains & optimization Exception Management of Orders IT Simplification Incorporate the new demand models (Flow-Through) Order & Promotion Workflow Auto-approval of orders 4. Implemantation ApproachMuch more than implementing technology

  9. 4. Implemantation ApproachImplement to Innovate 1. Information Integration: Demand forecast of Stores 2.- Maximize replenishment volumes by: Cross-docking & Flow-Through 3. Minimize replenishment Cost (EOQ) vs. force stock reduction 4. Promotional stock & replenishment management at the DC Level 5. Make the replenishment process automatic 6. Massive management of Administrative Parameter 7. Adjust the new organization to be oriented to the new process

  10. 4. Implemantation ApproachAn enterprise transformation not a systems implementation -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 DIAGNOSTIC QUICKWINS 8 months STORE AUTOMATIC RE-ORDERING 5 months PROMOTIONAL PROCESS 4 months FLOW THRU 6 months DC AUTOMATIC RE-ORDERING PRIMERA TIENDA 3 months DOCK SCHEDULING 5 months SUPPLIER INTEGRATION BENEFITS DELIVERED

  11. 5. Benefits delivered

  12. 6. References Example Example

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