Many supply chain managers think their forecasting problems would be solved if they could only get good point-of-sale (POS) data. But it's not that simple.
The plight of today's supply chain manager could be fairly compared to that of Tantalus from Greek mythology. Trapped in the underworld and parked by a pool overhung with boughs laden with luscious fruit, Tantalus was doomed to spend eternity tortured by hunger and thirst in the midst of plenty. Each time he tried to drink, the pool drained away; each time he reached for a pomegranate or fig, the boughs receded. So it is for the average supply chain or distribution center manager yearning not for a sip of water or a pear, but for accurate data on the actual demand for the goods in his warehouse.
In theory, gathering demand data should be a matter of feeding all sales, tracking and inventory information gathered throughout the supply chain into a great ravening machine that links every party in the supply chain to every other party. But right now, there's a piece missing—the point of sale (POS) information gathered in retail outlets is almost never fed into that machine.
Why not? The main problem is that POS information is some of the least accurate you're likely to come across in the supply chain, answers Mark Johnson, vice president of marketing at G-Log, a vendor of supply chain management software in Shelton, Conn. "It's very nervous data, which is not very good for supply chain operations," he says. "The raw POS data still requires a lot of manual intervention before it can be digested into the supply chain."
Johnson gives this example: If a customer gets to the checkout counter and notices a defect in an item, often the clerk will swipe only the replacement item's bar code, although both items have come off the shelf. Multiply that over thousands of retail outlets over 90 days, and the result is a heavily distorted picture of stock on hand.
The other problem is that even perfect POS data will never be an absolute predictor of future demand. "Customers are notoriously fickle and their past demand patterns are less valuable in an era of rapid change in products, distribution and sales strategies," says John Fontanella, vice president of research at AMR Research in Boston, in a report titled The Demand Driven Supply Network: Striving for Supply Chain Transparency. For that reason, the data gathered as bar-coded items are swiped through the cashier's station will never be more than a part of the picture.
As good as it gets
Yet the fallibility of POS data hasn't discouraged Al Giunchi, director of distribution logistics at pet products manufacturer Hartz Mountain Group in Secaucus, N.J. For 10 years now, he's been extracting sales information from his company's main customer—Wal-Mart—and feeding it back into his own supply chain.
Every day, through the Internet, Hartz receives POS information on its products from thousands of Wal-Mart stores around the country and the 36 distribution centers that serve them. Through that mechanism,Hartz Mountain learns which products are selling, how much inventory is on hand in the individual stores, and what's available to top up the stock from nearby DCs. "We see inventory levels in stores and in the 36 DCs. We see what product needs replenishing and where that product is—on the East Coast or the West Coast.And it's in real time.You're looking at the product come off the shelf and out the store instead of out the DC," says Giunchi.
The Wal-Mart POS information isn't monitored directly by the logistics division. It's in the hands of a customer service team consisting of three people in Secaucus, and three in Bentonville, Ark., where Wal-Mart is headquartered. They, in turn, feed information about fluctuations in inventory levels and demand to the logistics group. When Giunchi wants to look at the data, he goes through a password-protected part of the World Wide Web (a step up from the early days when he used an EDI system).
Wal-Mart's sales forecasts tend to be almost uncannily accurate, says Giunchi. "Their computer system is second only to the government's. They know that a Wal-Mart in the Northeast is not going to need the same items as one in Arkansas. When 9/11 hit, they knew they'd sell more guns in Bentonville, Ark., than in Secaucus, N.J. Plus all of a sudden, there was a spike in gas can sales because people were hoarding gas.Wal-Mart knew all that. All that information started flowing through the system very quickly."
Responding to Wal-Mart's rapidly changing forecasts and constantly monitoring in-store inventory requires a lot of hard work, Giunchi says. "It takes a lot of maintenance, because there might be discontinued items or special promotions or delays for items coming in from, say, Asia or Brazil," he says. Returns, alone, occupy two members of the six-person team monitoring POS information. "The data does need scrutinizing and that's why you need six people looking at screens every day."
Aside from dirty data and shipment delays, the sheer size and nature of the consumer market means POS information is never going to allow anyone to stay exactly abreast of demand. "The problem is the vast number of variables in the system," says Giunchi. "You may think that a particular dog chew is going to knock people's socks off, but it doesn't. Or one product will unexpectedly take off and Wal-Mart will say 'I ordered 5,000 originally, but now I need 45,000 on the same day I wanted the 5,000'—and then the panic starts to set in. Or they order something in September and need it in time for Christmas," Giunchi continues. "So POS information helps maintain the flow to the stores of items that are already there. But it still doesn't help you if you're trying to push an item and you don't know if the customer is going to want it or not. There's no software in the world that's going to smooth that out."
All the same, Giunchi would welcome the opportunity to work with POS information from other major customers, instead of relying on vendor-managed inventory techniques, as Hartz Mountain does with Kmart,Walgreens and Winn-Dixie. Though popular, vendor-managed inventory programs, in which the products' supplier decides how much stock to put in the customer's distribution centers, don't get into the same detail as POS data. "VMI stops at the warehouse," says Giunchi.
Not imPOSsible
Given the number of kinks that have yet to be worked out, it's no surprise that G-Log's Johnson says few companies are currently using POS data well. The ones that have mastered it include computer company Dell Inc. and Tesco, the British supermarket chain. Dell's selling structure, where customers order direct, typing their own information into a Web site, means its POS data are clean. Matters get a bit trickier when it comes to supermarket retail, where there are hundreds of thousands of SKUs to keep track of and more opportunities for mistakes. And it will be tougher yet to attain that level of sophistication in the retail sector.
Johnson says it's clear that feeding POS data into sales and manufacturing decisions works, because it's happening in industries like computer supply. But, in consumer retail, you're talking about adding an extra couple of zeros to the number of transactions, he says. "When you add dirty data, the complexity just takes off," Johnson says. "Transferring that into clean data and then translating it into orders that are digestible in the supply chain is a challenge, but it's not impossible. Absolutely not."
Despite the difficulties, there's still a lot to be said for feeding POS data into the system, Johnson adds. "The better the data you have, spanning the entire supply chain from factory to point of sale, the better you're able to reduce inventory and exposure to damage."
For Giunchi, the benefits of using POS information far outweigh the tribulations. "It gives us more intelligence. Whether we're able to perform with that intelligence is the key, and that's when we come into the real world," he says. "Planning and forecasting is so difficult. The weatherman doesn't get fired if he gets the weather wrong—it's Mother Nature's fault. But we don't have Mother Nature to blame in the world of business."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.