The ultimate goal for retail supply chain planning is to ensure that the right products arrive in the right amount at the right time in the right place. However, to consistently meet consumer demand, which can fluctuate due to a multitude of factors, retailers need to carefully manage capacity utilization in both distribution centers (DCs) and stores. By taking a proactive approach to capacity management that allows for efficient use of both space and workforce resources, retailers can overcome supply chain limitations, lower operating costs, avoid bottlenecks, and create a smooth flow of goods.
In a November 2020 RELEX webinar moderated by Business Analyst Liisa Raudasoja, Drive Operational Efficiency with Proactive Capacity Management, Senior Retail Planning Consultant David Matern and Senior Solution Consultant Janne Kahila discussed:
- Best practices for supply planning and capacity management to meet constant changes in demand
- Strategies for effectively and efficiently smoothing fluctuations in delivery volumes
- Ways to improve shelving efficiency and minimize goods handling costs
- How to optimally leverage available shelf space and workforce resources
Matern shared how the first step toward successful capacity management is to establish supply chain transparency and identify demand patterns. Transparency allows the root causes of capacity issues—and not just the symptoms of these issues—to be addressed. He noted that retailers need to incorporate a vast amount of data into meaningful, highly accurate forecasts in order to adequately predict future behavior at the store and DC level. With this foundation in place, retailers can not only plan for the future but also proactively free up capacity, allowing for more flexibility to react quickly when unexpected events arise.
Kahila then discussed the importance of taking a dynamic replenishment approach to improve capacity management. Retailers that include short shelf-life products or products with limited shelf space in their assortment may need to use “just-in-time” ordering to ensure optimal freshness and minimal spoilage of those items. However, when managing ambient products and products with sufficient shelf capacity, retailers may want to use an ordering approach that ensures maximum efficiency to improve capacity utilization and minimize operational costs.
Instead of relying on just one type of ordering pattern, Kahila explained, retailers should take advantage of both as appropriate in order to strategically balance deliveries and better align them with demand fluctuations, shelf space, and store layout. This can result in better utilization of workforce resources, a reduced chance of exceeding capacity limits at the DC or store level, and maximized efficiency in shelving, while also cutting down on stock-outs and excessive use of the backroom.
Kahila and Matern also shared how to gain efficiencies in goods handling and shelving, as well as why efficient use of space and workforce requires unified planning. Kahila noted that enabling smart capacity management that is both controlled and transparent can bring significant benefits, including:
- Improved resource utilization
- Operational stability in the supply chain
- Increased customer service levels
- Better employee satisfaction
To learn more about best practices for capacity management and how a proactive approach can improve operational efficiency and reduce costs, check out the full presentation.