Have you ever considered how your smartphone was placed in your hand, how your television arrived in your home, or how your printer was set up in your office with paper and ink already inside? As a consumer, you probably went online or to a physical store to purchase those goods. Seems simple enough, but how did that product arrive at the retail storefront or on your doorstep? Who assembled the item before it was shipped to a distribution or fulfillment center? What raw materials were necessary to make the good, and where did they come from? It is easy to only think of the effort you exert to purchase the item, but shoppers rarely consider the amount of time, planning, and capital that is required to get those goods to the retailer. This is where supply chain management comes into play.
What is the Supply Chain?
A more technical definition of supply chain management is the total system approach to managing the entire flow of information, materials, and services from raw-material suppliers through factories, warehouses to the end customer, and back. This definition, while accurate, is more of a broad stroke. Depending on the vendor, the supply chain functions differently in order to achieve the company’s goals for various metrics, such as cost, profit, inventory, shareholder value, and so on. However, at the end of the day, all businesses rely on customers purchasing their products, so it is the responsibility of those managing the supply chain to accurately forecast customer demand, inventory levels, production quantities, and other metrics that may impact company performance.
What Does gap intelligence Have to Do With Supply Chain Management?
Now you may be wondering how supply chain management relates to gap intelligence? Here at gap intelligence, we are a group of experts on categories ranging from printers to vacuums to notebooks and more. While we may have charming personalities and dashing looks, these traits have not made us specialists. The thing that sets us apart from the rest of the market intelligence industry is our GFD, Great Freakin’ Data. With GFD, we know every product in our category, we know the price of those products, we know where the products have been placed both online and in-store, and we know which products feature promotions. While the 4 P’s relate to marketing, the combination of these can drive demand and will ultimately influence how someone on the operations side of the business will forecast raw materials needed, production quantities, and inventory levels.
Within the last twenty years, vendors have had to adjust how their supply chains function as omnichannel distribution has become the new normal and is expected by most customers. Shoppers want what they want, when they want it, delivered where they want it, for the lowest price. These demands pose a challenge for most suppliers as they want the highest possible margin, lowest fulfillment costs, lowest inventory, lowest risk, and maximum sales. Online storefronts have helped to give both customers and vendors what they want. It also makes it easier for companies to gather statistics on product performance so as to more accurately forecast future production quantities and inventory levels. With this information, businesses are able to paint a picture on customer demand for products, but there are holes in their data, holes that can be filled with gap intelligence’s data.
While companies have access to data about their product assortment online, gap intelligence has access to every product within our categories located at specific online and physical storefronts. gap intelligence in some ways acts as a barometer of how well a specific stage in a company’s supply chain is functioning. As explained by Michael Dell, “Why am I focused on the supply chain? It’s simple. It is a barometer of my business. All the problems show up first in the supply chain.” It is important that a firm’s supply chain understands what products and brands it is competing with within the market, what the expected price will be for its competitors’ goods, and what items will likely be placed at the same retail and e-commerce sites. All of these factors will influence customer demand, the necessary amount of inventory, the optimal level of production, and the quantity and frequency of raw material orders. If this information is not acknowledged while forecasting, it could result in something known as the Bullwhip Effect.
What Is the Bullwhip Effect and Why Does GFD Matter?
Let’s explain the Bullwhip Effect in a story. Say there is a new smartphone that was released last month. The smartphone is not performing as well as anticipated as shoppers are purchasing other models or not purchasing a new phone at all. The decreased customer demand means that retail locations will have excess inventory and will cut back on the quantity or frequency of their orders. This then impacts warehouses that store that smartphone model, as the vendor will have even more inventory due to declining orders from retailers. The vendor will then decrease production levels resulting in excess raw materials in storage. At the end, the vendor will order much less frequently or order much smaller quantities of the raw materials.
If customer demand increases or remains steady over time, inventories are likley to shrink, pushing resellers to order more inventory and vendors to increase production and order more raw materials. To summarize the example, small fluctuations in customer demand result in increasing swings as you move up the chain from resellers to manufacturers to suppliers. While the Bullwhip Effect is one example of what can go wrong if the supply chain does not account for competition in the retail landscape, it is key to understand how much impact the retail floor has on supply chain management.
Businesses need to look to the customers in order to understand what they are being exposed to and what could influence them to purchase an alternative product. This is why gap intelligence’s GFD is so important. We see everything that customers are being exposed to both online and in-store. As experts, we look at the specifications of all products offered, how items are priced, where products are being placed, and all of the promotions available. All of this data creates a picture of the competitive landscape that impacts a brand’s sales. As one of the newest gappers, this is just one use of GFD that I’ve dreamed up, and over the last 8 months, I have come to realize that gap intelligence is so much more than just data. gap intelligence is the blending of passion and imagination that come from solving problems with our Great Freakin’ Data.