‘Out of stock’ is something that neither customers nor suppliers like to hear. Keeping inventory levels exactly as high (or low) as to match customer demands is a huge challenge for companies. METRO has a solution: Integrated Planning. It means optimizing the supply chain so that everyone benefits.
Let's think of a wholesale store, a depot and a warehouse – all 3 plan their requirements separately and order their goods individually. Or: An expert team in charge keeps an eye on all stocks and places orders together, first taking into account the demand of customers. What sounds more reasonable?
Now the cherry on top would be that an expert predicts when, where and how much of which goods will be ordered – and how to source accordingly. And indeed, this is possible. The so-called Integrated Planning model brings forth an integrated solution that addresses one of the major challenges of the industry: the availability of goods.
‘We needed to replace our traditional and transactional process for managing inventory levels while adjusting for demand fluctuations,’ says Marco Celenta, Global Director Supply Chain, about the new demand-driven wholesale supply chain strategy at METRO. The aim is a single and integrated view of demand across stores and countries to better forecast inventory and match customer needs in each country – while driving availability, inventory reduction and profitability.
After all, high levels of inventories as well as out of stock cost money, and it ties up time and resources when Category Managers and Department Managers in stores have to handle orders. It also distracts them from their primary task, which is being there for customers and colleagues. With the new approach and organization, now a Supply Chain team of experts in Demand and Supply Planning focuses on forecasts and orders in all stores and warehouses. ‘Thanks to the Integrated Planning transformation, we can now focus much more on the improvement of commercial relations with our wholesales customers in the stores,’ says Celenta.
What makes it so innovative is that the process is customer-driven. Unlike conventional systems, it approaches the entire procurement process backwards, starting from the customers’ needs. The new system is based predominantly on the understanding and planning of future sales. This requires expertise, new processes and accurate sales forecasts, powered by a new digital tool. While previously, each wholesale store placed its own orders, the new METRO Demand & Supply Planning (MDSP) software and connected processes facilitate central oversight and coordination. METRO is therefore mobilizing its key resources: METRONOM is providing the vital IT infrastructure, and an equally important element is the change management process, which the Corporate Supply Chain team is overseeing. ‘Developing dedicated training programs for our Demand and Supply Planners but also for the Category Managers as well as Department Managers at the stores will support the proper implementation of Integrated Planning,’ says Celenta.
But Integrated Planning is not only relevant to colleagues involved in the Supply Chain department. ‘It enables the Offer, Supply Chain and Operations departments to work closely together. In this sense, Integrated Planning optimizes the whole organization.’ The software in use is powered by Blue Yonder/JDA, a leading digital solution in the market.
The company-wide supply chain solution is already implemented in Poland, Spain, Belgium, Ukraine, Hungary and by now going live in Germany and Russia. France, Turkey, Portugal, Croatia, Bulgaria, Serbia, Italy are the next countries on the roadmap. By 2022, the aim is to have implemented the process in all 25 METRO countries. The roll-out is part of a ‘Service Level’ strategical direction, linked to the wholesale transformation. ‘What we want to achieve is a substantial improvement of the service level for our customers in the countries, regardless of the channel they choose. Integrated Planning is and will be one of the key pillars of this ambition,’ says Celenta.
So, availability of goods is a major industry challenge, and will probably always be. Integrated Planning is part of the solution to this. For sure, not all out-of-stock situations can always be avoided. But it is already apparent after the successful rollout of Integrated Planning in many countries that the availability of goods has been increased substantially. And after all, despite all the automation and forecasts: customer relationship is key.
Erol Yildizgörer, Head of Supply Chain Management at METRO Germany, is therefore confident with regard to the experience in Germany: "With the Integrated Planning process, we ensure that we can meet current and future challenges appropriately. This new type of cooperation enables us to react more quickly to short-term developments and distribute goods to our customers according to their needs.”
