In the US, the wholesale industry traded $5.4 trillion in 2015, almost twice the size of the retail industry. Yet the state of the industry is languishing. Operationally, profit margins have been stubbornly flat and supply chain performance measured in inventory performance has been worsening over the last five yearsii. Strategically, the shifting retail landscape due to advancements in ecommerce and direct purchase agreements between retail and manufacturers means that wholesalers compete in an increasingly demanding market.
Despite the industry headwinds, leading wholesalers and distributors continue to grow and gain market share. Successful wholesalers are choosing either an economy-of-scale-based cost advantage by pursuing M&A consolidation or a specialization-based approach on niche product areas with differentiated service. In fact, wholesaling continues to be a highly fragmented industry, with the median annual turnover of $56M in 2014.
For long-term viability, growth and market share increase must be balanced with improvement in supply chain performance. Only by reducing waste, optimizing inventory and improving customer experience will a wholesaler escape the pack and establish the base for profitable growth in the challenging years ahead.
In short, IT infrastructure with disparate sources of data, lack of visibility into the actual demand signal, manual planning and outdated analytics result in the wrong mix of inventory turns and operating margins with mixed results in customer satisfaction.
A New Planning Approach with Solvoyo:
Solvoyo’s cloud based planning platform has a demonstrable track record of producing significant economic benefits for several of our clients in terms of (i) sales increase due to better product availability, (ii) optimized inventory levels, and (iii) higher gross margins due to less waste or obsolescence. To make the case more tangible, here is how one of our clients, a leading CPG distributor in Eastern Europe, has successfully deployed Solvoyo platform and had measurable benefits.
Situation pre Solvoyo:
- Critical stock outs at DCs
- Rising stock levels at regional warehouses
- Growing product waste
- Lack of end-to-end supply chain visibility v. Excel ghettos
Big Data Analytics
The Solvoyo platform is designed to capture a wide range of data and transform them into meaningful analysis. The platform can be configured to automatically (i) bring in detailed business data on both the demand and the supply side, (ii) pipe in additional upstream/downstream data such as supplier/customer inventory, weather, economic stats using our flexible APIs, (iii) combine data across multiple regions, channels, product lines and vendors, (iv) plan fulfillment on the demand side and replenishment on the supply side, accounting for seasonal variations and (iv) incorporate marketing insights about the effect of promotions derived from a Solvoyo’s statistical approach.
For our client`s pursuit of better performance, Solvoyo configured the platform for end-to-end planning. Data are automatically pulled in from ERP systems and daily SKU-based forecasts are automatically generated. The web-based collaboration portal allows different teams within customer to update the forecasts within the rules of a workflow engine. Final forecasts and the Solvoyo-generated inventory plan make the basis for the replenishment orders to the supplier base.
Integrated planning viewpoint:
Solvoyo platform provides a common data schema to work across supply chain functions, serving as the single “source of truth” for planning. The end-to-end planning approach reduces planning cycle times, synchronizes flow between echelons, and optimizes performance across competing supply chain functions. Furthermore, better data and synchronized planning also allows more accurate tracking and measurement of the KPIs. Within six months of go-live, our client experienced considerable gains in demand planning productivity and a drop in errors due to human factors: 20% improvement in forecast accuracy and 10% reduction in overall inventory investment without degrading its on-time-in-full (OTIF) performance.
Imagine a planning platform that not only supports your daily or weekly planning functions but that also proactively analyses network-wide issues. By acting as your supply chain planning system of record, Solvoyo automatically becomes a reservoir of data from where you can extrapolate strategic insights.
In fact, all our wholesaler clients use the platform data to run periodic inventory stratification projects that help them fight the proliferation of SKUs that so often handicaps this industry. You can routinely answer your strategic supply chain questions like: How much can I grow with my current infrastructure? How should I downsize with the least effect on my clients? If I need a new distribution center, where should I put it? Are my transportation lanes optimal? How do I rationalize my facilities post-merger? Which are my problem products or customers or vendors?
Your supply chain world simply becomes clearer and easier to manage!