When drinks retailer Thresher Group embarked on an overhaul of its business last year, sorting out its creaky supply chain was at the top of chief executive Roger Whiteside’s to-do-list.
Now, having rolled out its new forecasting replenishment software in the final phase of that overhaul, Thresher is finally beginning to see the benefits, says Simon Thomas, IT and business change director.
It was the last piece of the jigsaw begun two years ago with the implementation of a merchandising system, followed by warehouse and store replenishment systems from JDA.
The business had been using a lot of legacy systems, but they had become unsuitable for a business with 1,900 outlets, says Thomas. “We had this huge business with no modern forecasting systems, with stores placing orders individually. There was no control over the 2,000 managers; they just ordered as customers bought goods in-store.”
By providing suppliers with 13-week forecasting, the company can advise them on any under or over-stocking in its warehouses. This ensures it has the right product in the right outlets of its Thresher, Wine Rack and Victoria Wine outlets.
Stock, supplier and demand information is fed from the merchandising system - the core inventory platform - into the warehouse system that then analyses and interprets the data to make product forecasts. These might include seasonality, recent store sales and upcoming promotions. The ability of the warehouse IT to calculate the projected ordering requirements for each store ensures that sufficient stock is available in each of the company’s warehouses. “We have now got a view of what stock is needed in each store, so we no longer get spikes in demand. This was a problem because, if there was a rumour of a shortage of a certain line among the store managers, they would panic and over-order - so the warehouses would empty quickly,” says Thomas.
The situation was magnified when a promotion was pending. However, with the new system taking into account previous promotion types in its forecasting calculations, Thresher can now make a much better stab at what stock is needed in its stores. Store managers no longer have to worry about empty shelves or having too much reserve stock piled up.
While the automated forecasting system is unable to match the skill of the top 10% of managers, it improves the remaining 90%, thereby raising the bar for the lowest common denominator, says Thomas.
Thresher has also been able to use the data to range its stores better to ensure they are more in line with local customer demand. Product ranges can be set for groups of stores whereby outlets in Scotland (which sell 50% more vodka than elsewhere) can be grouped together and allocated their ranges accordingly. Not surprisingly, the company’s previous reactive - rather than proactive - ordering methods caused problems with its suppliers, who might have received an order at extremely short notice.
And, frustratingly, these products might not actually have been required until a later date because the stores’ over-ordering methods would often result in them having goods sitting around for a number of weeks.
The new operation (with the help of the store replenishment system) also ensures stock can be in-store in no more than six days - depending on when managers order in the once-a-week delivery cycle. With the previous erratic ordering, this could not be guaranteed and the added complication of having long lead times for certain products (such as those sourced from overseas and those in-bond) exacerbated the problem.
Although available forecasting data is not yet fully exploited, the company has started to share the information with its suppliers to keep them up to date with inventory movement. “The supplier is now aware of likely orders four to six weeks ahead. We share current sales, projected sales and also add in the forthcoming promotion cycles to give them a view,” he says.
A lot more use is expected to be made of this forecasting data - particularly as EDI (Electronic Data Interchange) looks likely to be introduced in future - with the prospect that Thresher might be able ultimately to demand lower prices from its suppliers.