Making the Case for Better Supply-Chain Management

Those of us in the consumer electronics sales function are constantly reminded on how we need to sell what’s in stock – and to sell around backorders. That is very solid advice; nobody makes money on backorders and holding stock at the end of the month adds to next month’s inventory burden – not to mention the negative impact on cash flow if the inventory continues to pile up. And if the inventory increases, we might not have the funds available to purchase those fast-turning, high-demand models that help us sell the slower moving items. Vicious cycle, isn’t it?

It has been said, “We need to keep inventory levels higher if we want to maximize our business.” A better statement might be, “If we had the right inventory in the first place, we would be able to maximize our sales with fewer models remaining unsold at month-end.” If that statement is true, then merely having higher inventory levels would have no direct connection to maximizing sales – particularly if you took steps for initially having the right models in inventory.

Some of you might have heard of the Collaborative Planning, Forecasting and Replenishment (CPFR) business model. This is a supply chain management approach that combines the best practices of sales and marketing with the supply-chain planning and execution processes to improve availability, reduce inventory and cut the costs of storage, logistics and manpower. CPFR is highly dependent on the collaborative flow of information – I stress the word “collaborative,” as this is crucial to the success of the program.

The CPFR model consists of three relationships (customer, retailer and manufacturer) and how they are managed through four phases:

1. Strategy and planning: Creates the platform for the collaborative relationship among all active participants. This includes the establishment of joint business goals, choice of business partners, assignment of roles and responsibilities, and metrics planned against a calendar. Retailers are choosing vendors and managing product categories as part of this phase of the process, while manufacturers are performing account planning and determining how much value they have to their dealer base.

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  • rheiblim

    Keith you are correct to focus on this, as it is one of the main issues for all parties. The collaborative process you note is clearly being executed at the top volume levels such as firms like Best Buy, but indeed the practice can be done at any level where some effort and communication and cooperation is present. It requires dropping or moderating the competitive aspects of the buy/sell situation. I think there are even more forward models for managing the supply chain when it comes to electronic fulfillment and sales and expect a lot of development there, but what is important is that small and medium businesses do not think this is out of their reach. It is available. Thanks again.