Image: Balzac Fresh Food Distribution Center, by Walmart

Few areas of the software market in the past ten years have been as hot as supply chain.

Supply chains in many industries have been trying to cut costs out of distribution networks while reducing order lead time and inventories. They want solutions for modernizing what has traditionally been a backwater: truck booking; warehouse management; pallet management; order picking; truck loading; yard management; and delivery discrepancy management.

This category also includes software for demand forecasting and optimal product deployment throughout a company’s distribution network. Demand planning software can be fraught with peril for companies lacking the discipline and attention to detail needed to master these applications. These applications can be difficult to evaluate, from a buyer’s standpoint. Proceed with caution.

Companies in the supply chain space, known as SCM, (supply chain management), include industry leaders Oracle and SAP, and firms like JDA Software, Manhattan Associates and Red Prairie (recently merged with JDA). JDA is a firm that has grown by acquiring industry-leading supply chain management applications such as i2 and Manugistics. The company claims that 6,000 firms worldwide use its SCM software.

Supply chain applications can be single-purpose or inter-connected, like an ERP system. The supply chain is like a business-within-a-business: it has at least five processes that must be interconnected in some way: 1) demand planning (what will customers order?); 2) distribution network planning (where should we store it before it is shipped to the customer?); 3) manufacturing scheduling (how much should we make, when?); 4) material requirements planning (MRP – what raw materials & supplies do we need?); and 5) warehousing, transportation, and shipping (store the product and ship it to the customer when needed).

A single-purpose application (Demand Planning, Warehouse Management, Transportation) will claim to solve your problems in one or maybe two of these areas. An inter-connected supply chain application will manage all five of these areas. Vendors that offer an inter-connected solution will present themselves as offering total SCM, or supply chain management, solutions.

It’s hard to carve up the supply chain and say one application is better in one area than another, because probably the most important thing is the integration between the five main segments of demand planning, distribution planning, manufacturing scheduling, MRP, and warehousing and shipping.

If you had to choose, the demand planning software might be most important, unless your customers place orders way in advance of shipment; on the other hand, you might have multiple manufacturing locations or warehouses and you need a solution for where to make and ship your product most efficiently.

Image by JDA, Inc.

Flowcasting is the estimation of future demand using data about the flow of products through your supply chain, to your customer and through their network to the shelf and checkout.  Ostensibly, flowcasting gives you a fresher picture of demand than traditional forecasting, which mostly uses historical demand patterns and demand spike estimates for upcoming marketing and promotional events.

Flowcasting requires accurate data from several points in the supply chain (yours and that of your trading partners), from the shelf backwards. The data has to be summarized in the same time sequencing as your physical supply chain in order to see cause-effect relationships, and it has to be “normalized” so that data points collected from your customer’s system have the same nomenclature as those in your systems.

As you might suspect, choreographing the successful flowcasting system is no small effort.

Nonetheless, software vendors are beginning to market “flowcasting” solutions.  This description from JDA for its product is a good summary of what flowcasting applications are at least intended to do:

“JDA Flowcasting enables channel-wide joint planning and collaboration between manufacturer and retailer based on sell-through forecast, promotions and supply chain planning parameters. This solution delivers visibility and enables analytics directly from the shelf, tying in replenishment and time-phased order collaboration with key trading partner participants. Enhanced collaborative planning drives improved profitability, productivity and control.”

In simple terms, software for flowcasting tees up all the downstream analytics from your supply chain and integrates it with your supply chain planning systems for smarter sourcing, production, and distribution decisions.

Should you invest in these applications?  I think some firms will see more benefits than others:

• Firms that have strong collaborative selling plans with their trading partners stand to benefit from the “one version of the truth” that can come from both retailer and suppliers being on the same flowcasting platform;
• Companies with fast-moving supply chains and relatively short production and delivery lead times may gain benefits from the ability to act on the near-real time consumption data.  For example, production plans and inventory settings for new products can be adjusted for items that are selling through the supply chain faster than predicted;
• Organizations that have more experience with supply chain planning applications and more expertise internally with data-driven supply chain management will have a shorter learning curve with flowcasting.
• IT departments that have full control over their ERP or other systems of record and can competently integrate supply chain planning applications will also benefit sooner and at less expense.  It is from within an enterprise’s ERP system that, among other sources of data, successful flowcasting will need to extract and use accurate inventory, on-hand order, and pricing data including scheduled promotional discounts.

Consultants Andre Martin and Mike Doherty have written a book about flowcasting.