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The next piece in the puzzle after the statisticians have done the forecasting is working out exactly how is stock to flow around the business, and between the business and it's suppliers, in order to enable the planned demand to be fulfilled and to avoid unnecessary excess stock.

Someone once said that stock replaces information in the supply chain - there is so much truth in that statement, in particular with regard to safety stock. Information and the ability to access information is critical to supply chain management decisions.

Pre-season when initial orders are placed the stock commitment would ordinarily be based on a bottom up rough-cut calculation of display stock plus X weeks forward cover, usually 2 weeks, as most retailers still run a minimum of weekly store replenishment and if a week fails there needs to be sufficient stock to carry forward to the next replenishment opportunity.

This initial order is effectively a "set-up" order - and in many retailers display stock alone is a huge investment, the percentage of the total order which is to make up display usually dwarfs the meagre amount to cover 2 weeks of sales. Still, set-up is necessary and assuming our forecaster has pushed back on level of display requirement in relation to rate of sale and assortment decisions were taken for good reasons then there isn't much we can do about this "set-up" quantity.

The real important piece to consider is what happens next. How, even before sales come through, should stock be flowed into the DCs and out to the stores (or in the case of e-tail or home delivery only, to the customers). Add to that how much safety to add on to cover for uncertainty and without some information about forecast accuracy, supplier reliability, product lifecycle and relative importance of the product stock levels could spiral out of control.

Planned inbound flow impacts all the actors in the supply chain from manufacturers to suppliers, logistics agents to the retailers own DCs and stores. If flow plans are to work in the real world they need to be built up from the line level sku-store demand plans and flushed back up through the supply chain at the various aggregation points to enable what could be termed "multi-nodal MRP".

In essence a quality supply chain planning and management process would be able to look at all planned store replenishment quantities, inclusive of any store assortment changes or store space changes that impacted the replenishment to an order up to level. Each store would have a link to a supplying DC and as such each store's planned replenishment quantity would become a planned demand on that DC. The sum of all those store demands gives a view of the DC demand. Yes, an element of safety would usually be added at this level of aggregation, but with good information that safety can be statistically calculated and variable, depending on such aspects as where the product is within it's lifecycle. All of that in turn enables a view of what the demand from the supplier must be to service each of the DCs demand.

Out of all this summing up we achieve a supply chain flow plan that is relevant to the sales pattern. It is what could be termed an "unconstrained plan". It may be that suppliers can not deliver to the plan proposed, and suddenly constraints begin to apply e.g. stock may need to be pulled forward to secure availability, or to avoid factory closures at certain times of year. That's fine. The unconstrained plan is effectively the ideal, and the supply chain manager can work from that point to define the achievable plan, within their own constraints such as DC capacity, throughput and open to buy.

The whole process is achieved by making informed trade-off decisions. This again is an area where information is key to the ability to deliver a quality outcome.

A demand driven supply chain can deliver significant benefits to the supply chain management process. Utilising data from the core transactional systems with regard to which stores are associated to which DCs, replenishment frequency, assortment / space changes, a future view of the supply chain flow requirements can be achieved - the first place to open the dialogue with the suppliers and the internal physical supply chain colleagues to negotiate the way through any constraints.