Information technology has helped streamline the flow of information within companies, but in many cases the planning paradigm itself has not been revised. Planning is still in large buckets, and inflexible plans are passed “over the wall” to other departments and partners. Even where profitability is held hostage by demand uncertainty, the planners have to rely on a “gut-feel” of how their plans should reflect uncertainty.
MNI Partners has been a pioneer in the area of Flexible Supply Planning (FSP) that addresses these shortcomings and unlocks the true potential of the supply chain. MNI Partners has implemented FSP across various stakeholders, including manufacturers, logistics providers, brands and retailers.
Conventionally retailers place large orders less frequently further away from the selling season. With Quick Response retailers place smaller orders later and more frequently, even into the selling season: in effect, they bet smarter, more often, and smaller amounts.
Best suited for “short-lifecycle” industries such as apparel, footwear, toys and electronics, FSP includes an operational philosophy and detailed set of procedures that unlocks the potential of the supply chain. This comprehensive strategy for linking retail, logistics and production in a way that affords the flexibility needed to respond quickly to market shifts is built on proprietary theory and research and extensive experience. It is a set of measures that act in concert to dramatically reduce the total time required for a supply chain to respond to end-consumer demand by establishing production schedules closer to the selling season, and basing replenishment on sales data to assure that manufacturers and retailers have the right product in the right place at the right time.
The areas touched by FSP include:
- Measurement of demand uncertainty.
- Optimization of resource hedging and finished goods planning.
- Flexibility contracts with suppliers.
- Change management throughout the supply chain.
- Measurement of FSP results and ROI.
“Private equity players should pay close attention to Flexible Supply Planning. It is the surest way to reach best-in-class profitability for companies in the apparel, footwear, electronics and toys industries.”
—Manas Fuloria, MNI Partners LLC
Implementation of FSP entails significant change. Modularity, small batch sizes, short lead times, and low work in process inventory must all be implemented and business processes and information shared. The requisite mental shift that needs to be instilled necessitates a change in company cultures, and company philosophies need to be adjusted to embrace the larger picture, more of a world view, in order to understand and appreciate how the methodology and its execution fit into the grander scheme. The improved asset and inventory management, savings in costly markdowns and discounts, and agile, in-season response to consumer demand typically yield a 10–25% increase in profitability and a one-third reduction in risk.