This article is an excerpt from the report Agile Demand-Supply Alignment — Part Three: ADSA Solution Assessments.
A copy of the full report can be downloaded here.
This is the first installment of our serialization of Part Three of our research series on Agile Demand-Supply Alignment (ADSA). We define ADSA as “the capability to effectively realign supply and demand, during execution, in the face of demand volatility and supply disruptions.” Regardless of how good companies get at planning, ‘stuff happens’ and companies then need to be able to rapidly adjust to the evolving actual situation on the ground.
Part One of this series described the phases of supply chain planning and execution and laid out a framework for understanding the Elements of ADSA, as shown in Figure 1 below. Part One also includes examples of specific ADSA capabilities, such as In-Season Reordering, Agile Customer Mandate Compliance, and Opposite Hemispheres Strategy.
Part Two provides a framework for evaluating ADSA solutions, including what questions to ask solution providers, and how to shortlist providers. Here in Part Three, we assess nine different providers of ADSA solutions. This is not a complete market survey of relevant offerings, but rather a sampling of some important established and upcoming players. Each assessment is organized into five sections as follows:
- Target Customer Characteristics/Factors Driving Adoption — Characteristics of typical target customers and what is driving their adoption of the solution. This includes a description of which industries and which size companies this solution focuses on, with a list of some example customers.
- User Roles Supported – list of the primary user functional roles that the solution supports (e.g., procurement, logistics, etc.).
- Functionality Supported — Key functionality provided by the platform.
- Pricing, ROI, Time-to-Value — The structure and basis for pricing, how ROI is achieved, services offered, and what is the typical implementation time and time-to-value.
- Who This Solution is a Good Fit For – short summary of what types of companies this solution would be most appropriate for.
Here in Part 3A, we take a look at the first of the nine solutions, Alloy.
Alloy: Plant-to-Store Inventory/Demand Visibility and Corrective Actions
Alloy enables end-customer-demand-driven supply chain capabilities for CPG/FMCG1 brands. This lets the CPG firm make replenishment and demand-shaping decisions that take into account the current actual end consumption and inventory levels throughout the downstream network, rather than being driven solely by orders and forecasts from retailers.2 Alloy provides CPG companies with SKU-location visibility across their downstream supply chain, all the way to the POS data from their retailer customer’s stores, with alerts when inventory is predicted to be out of balance (shortages and excess), and tools to collaborate with retailers to resolve those imbalances.
Alloy uses current consumption and inventory data to show CPG firms what adjustments may be needed to current production and distribution plans. It helps them position inventory to the right points in the network. CPG firms can also provide valuable intelligence to their retailer customers and collaborate with them on jointly improving forecasts. It helps make CPFR actually work the way it was intended, and the CPG becomes a more trusted partner to the retailer.
The POS and downstream inventory visibility, modeling, and intelligence provided by the platform help solve business challenges such as reducing stockouts and oversupply, thereby reducing the high cost of lost sales and excess inventory. It can reduce the constant firefighting by providing better visibility and more advanced warning of issues, in time to do something about them.
Target Customer Characteristics/Factors Driving Adoption
The Alloy solutions are aimed at consumer goods brands that have complex downstream supply chains, involving multiple DCs and a variety of channel models. This includes brands that have their own stores, sell direct to consumer via their own ecommerce site, and sell through retailer’s stores and websites. Often these are fast-growing brands, struggling to rapidly scale up their operational capabilities. Regardless of the speed of growth, CPG companies that are constantly firefighting, due to demand volatility and supply disruptions, would be a good fit for Alloy — especially when the cost of getting it wrong is high (i.e., lost sales, lost customer loyalty, and profit erosion from excess markdowns). Alloy is a good fit for those who want to use end consumer POS data to drive decision making. In contrast, a CPG company that is satisfied with driving their planning and execution using the orders and forecasts they receive from their retailer customers may not find a compelling enough reason to implement Alloy.
Industry and Company Size Focus
Alloy focuses on serving CPG/FMCG brands, especially those in personal care/health and beauty, packaged food and beverages, high tech/consumer electronics, DIY automotive, and toy and hobby.3 Their customers tend to be mid-sized enterprises with revenue between about $250M to several billion dollars. Alloy serves companies across a broad range of maturity of practices and processes.
Users of Alloy tend to be customer-facing supply chain professionals in functional areas such as inventory management, supply chain planning, customer service, customer supply chain management, and sales/order fulfillment.
Harmonizing Data from Multiple Disparate Sources
The Alloy platform ingests data from a variety of sources, including retailer’s POS and inventory data. They have developed about 700 different pre-built data connectors that pull in and map data from major online and store-based retailers, ecommerce platforms, distributors, 3PLs, and ERP systems. Since the data comes in a wide variety of formats and semantic structures, the platform harmonizes the data into a single consistent canonical data model. This process includes things like: cleaning up master data so that product IDs, supplier names, and locations are consistent; converting units of measure to be consistent; mapping disparate product hierarchies into a single consistent set of product hierarchies; harmonizing product attribute data (e.g., names of colors, names of ingredients, types of fabric, etc.); and synchronizing calendars (e.g., fiscal vs. calendar years.)
Building and Maintaining Accurate Master Data and Map of the Distribution Network
The platform uses transactional data (e.g., from POS, orders, and shipments) and hard-coded locations to build and maintain an accurate map of the distribution network, including lanes, carriers, DCs, and stores. This enables accurate maintenance of lead times and supply-from/to locations, enabling more precise modeling of network-wide replenishment needs, timing, and quantities. As new transactions come in, the map is updated, along with master data, such as when a new product appears in POS or shipment data. Accurate harmonized consumption and inventory data, combined with the accurate up-to-date network map, enable Alloy to predict shortages and excess inventory.
Alerts, Drill Down, Recommendations, and Collaborative Resolution
Users are alerted when shortages and excesses are predicted by the platform. The alerts include information about which products are impacted, where the shortages are predicted to occur, and how many weeks of supply remain at each tier in the network (e.g., own DC, distributors’ DCs, retailers’ DCs, stores). Clicking on one of the products will drill down to show how that product flows through the network, including a view of days of supply at each trading partner (distributor or retailer) within each tier, and highlights where the trouble spots are. It shows which distributors are supplied by each of the CPG’s DCs, and in turn how many weeks of supply are left for each retailer through each of those distribution channels. The platform makes recommendations on adjustments to orders for each retailer through each distributor to compensate for the shortfalls or excesses. With a single click, all the relevant data for one of these trouble spots can be shared internally and with trading partners, along with comments and attachments, to discuss and agree on a resolution.
Pricing, ROI, Time-to-Value
Pricing Structure Encourages Usage and Collaboration
Alloy charges an annual subscription fee, paid upfront. The fee is structured to encourage maximum usage and data sharing across the organization; there are no charges based on the number of users or storage used. Instead, the subscription fee is based on several factors that approximate the value being realized:
- Products used — This part of the fee varies depending on which of Alloy’s three applications are being used: Demand Intelligence, Inventory Intelligence, and/or Demand Planning.
- Number of trading partners integrated — There is a fee per integrated trading partner (retailer, distributor, 3PL)
- Number and complexity of internal integrations (ERP systems) — Most ERP data integration (customer orders and shipments, product masters, internal plans & forecasts, unit conversion) and D2C eCommerce data are included in the base product price.
- Product/network mapping — Mapping of the downstream network is included in the base product price — i.e., mapping each individual SKU to its independent locations and shipping lanes (from plants to DCs to stores).
ROI Realization Mechanisms
ROI is realized through a variety of mechanisms:
- Prevention of lost sales — by having inventory in stock at the store.
- Reduction in spoilage and waste — fewer markdowns and not producing products that will become obsolete or expired.
- Increased sales — When the CPG firm is highly reliable, always on time, and providing valuable intelligence to the retailer, the retailer has more faith and trust in that supplier and tends to give them more sales, and in some cases grants them a category captain role.
- Reduced chargebacks — increased OTIF compliance.
- Reduced inventory carrying costs — By optimizing the entire system, CPG firms can run leaner without sacrificing service levels, by not carrying inventory that won’t sell.
- Reduction in freight costs — fewer expediting fees.
Core implementation services (getting everything integrated and working, and training users) are included in the regular subscription fee at no extra charge. Other services on top of that are available on a time and material basis, such as extended training, advanced systems configuration, and process design. Alloy also offers managed data services or consulting services which include data operations, client solutions expertise, and best practices in data analytics. Alloy employs a consultative selling process, identifying pain points and the use cases that Alloy can enable to address those pain points. For example, they may recommend that a CPG firm becomes more prescriptive with their retailer customers, instead of just being a passive order taker.
Rapid Implementation Enabled by Templates
Implementation typically takes about three months for the full solution, including the ERP integration. Individual POS integrations are quicker, sometimes in a couple of days or weeks, so the customers can start getting value sooner. As soon as the POS integration is validated, the customer starts getting visibility. Creating the network map takes a bit longer, but customers do not have to wait for that to start getting visibility.
To shorten implementation times, Alloy has templates aligned to specific use cases (e.g., out-of-stock, real-time plan adjustment, inventory management, collaboration, etc.) and specific roles (e.g., field sales, account manager, regional rep, demand planner, inventory planner, etc.). These role/use case-specific dashboards are starting points, which are modified, and iteratively tailored via agile prototyping with the users. Alloy professional services will link together multiple dashboards and views to solve specific problems.4 A lot of these templates start with exception reports, showing the appropriate filters, with drill-down available. An out-of-stock use case may start by showing predicted stockouts, with a drill down to problem locations and links to affected customer orders.
Who Alloy is a Good Fit For
CPG companies looking to improve their downstream visibility and build a supply chain driven by end-consumer demand should consider Alloy to help them realize that vision.
In the next installment of this series, Part 3B, we look at ANVYL, an integrated production management platform with a pre-certified network of strategic suppliers.
1 CPG = Consumer Packaged Goods. FMCG = Fast Moving Consumer Goods. — Return to article text above
2 The stream of orders from retailers can be distorted by forward buys, unannounced promotions, and other factors. — Return to article text above
3 Alloy does not focus on apparel/fashion or fresh and frozen foods. — Return to article text above
4 Sometimes Alloy will take an existing spreadsheet, developed by a user at the customer, and use it as a model to create the workflow. — Return to article text above
To view other articles from this issue of the brief, click here.