History Repeating ? -Steve Czetty

History repeating?

For as long as there were suppliers and retailers, the two have cooperated in what seems like a mutually exclusive goal:  maximizing profitability.  Both need to extract the best price from the other, so there has been a tradition to obfuscate as much financial information as possible from one another. 

In this climate of mutual wariness about disclosing too much information, an understanding blossomed between buyers and suppliers about a need for some basic financial information from each other’s business, so as to be able to formulate sound decisions[DHA1] .  (Walmart proved that collaboration reduces supply chain costs and generates cash through better inventory management.)  

Thus started the practice of buyers providing some hard selling information to their suppliers.  Initially this informal passing of selling data became expanded to more and more suppliers, eventually reaching the point where some buyers spent as much time disseminating information as they did buying.

Large retailers began by providing selling information via EDI 852 documents.  This data was readily available from their store systems, and setting up the transfer was a simple task to accomplish.  The savings on buyers’ time was well worth the cost of the service [DHA2].  The data provided always was, and still is (with notable exceptions) limited to units selling at a door level. 

 

Fast forward to today.  The EDI 852 document, known as Product Activity Data, is still in wide use today.  However more and more retailers are now enhancing this offering with a custom built web based portal solution.  On this portal they provide a totally different, and in many ways better, view of their selling activities.  The retailers’ goal in providing this new level of information is entirely altruistic.  They are looking to their suppliers for better products, availability and most importantly, assortments that better match buying patterns. They still will provide the limited PAD document, but some actually advise their suppliers that the data in the PAD document does not match the data on their portal.  

An unintended consequence of providing this enhanced access to data is the fact that the value of the information is largely lost when it comes to using it with any of today’s modern planning tools.  So, what would it take to make suppliers really happy?  Easy, keep the rich portals and pretty reports, the merchandisers love them.  As for the planners, send the EDI based PAD documents, but enhance the content with three critical components:  Inventory units, inventory dollars and of course, the retail dollar values.  And, make sure that the EDI data matches the data on the Portal.  Yes the file will get bigger, but the value of the information will skyrocket.  

Planners can plug this data into their systems with very little effort, and thus be able to provide their retail partners with what they need, the right assortment for every region, city and maybe even every store.

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NOTES: 

 [DHA1]Walmart proved that collaboration could reduce supply chain costs and generate cash through lower inventory numbers.  Hence, data sharing.

 [DHA2]Then came cost shifting… Using vendor resources for analysis….