Tripping Over a Complex Process

Sainsbury's has worked diligently to satisfy customers, using criteria established by an initiative called Efficient Consumer Response (ECR). ECR aims to provide the retail consumer with the highest quality service through integrated partner collaboration, information-sharing, and efficient supply chain operations. In the area of product promotions, ECR estimates that $4 billion can be saved across Europe by linking stores and suppliers more efficiently.
Consider the complexity of the average supermarket promotion. Sainsbury's might decide to offer a promotion on Nestlé coffees: buy one jar, get another jar free. Sounds simple. But, how does Sainsbury's calculate how much extra coffee to have on hand? If everything goes right and the promotion is a big success, the chains sell more coffee and boost profits. However, if the promotion is a big success and Sainsbury's orders too little coffee, then inventory runs out, customers are frustrated, and profits are limited. Conversely, if Sainsbury's orders too much coffee and the promotion bombs, the chain is left with unsold merchandise. In the case of perishable items like bananas or yogurt, Sainsbury's and the supplier takes a huge loss, because they can't sell those items later.
Multiply this scenario by the thousands of promotions going on simultaneously with thousands of suppliers, and you have the makings of a colossal logistical nightmare. "We were barreling into the next promotion without understanding the impact of the last one," Rowe says. "There are hundreds of people at Sainsbury's and thousands of people in our supplier base involved in promotions—brand managers, product managers, line managers, event managers, advertising managers, and the list goes on. The time for planning a promotion can be very short—anywhere from a week for perishable items like fish or fruit to several months for other products. We needed a way to synchronize people and information to correctly estimate stock levels, keep customers happy, and reduce product waste."