Valentine's Day deliveries: Vendor managed inventory prevents broken hearts

Sending or receiving a box of chocolates is not as simple a thing as it seems on the surface. If your Valentine's Day delivery arrived on time, your good fortune may be due to a supply chain management practice known as vendor managed inventory.

02/13/2008


Sending or receiving a box of chocolates on a day like today is not as simple a thing as it seems on the surface. If your Valentine's Day delivery arrived on time, your good fortune may be due to a supply chain management practice known as vendor managed inventory (VMI).
In order to romance customers for Valentine's Day, those boxes of delicious chocolates must take a rather unromantic trip through the supply chain—and the road from the warehouse to consumers' mouths is a long one. "Few realize that the success of Valentine's Day hangs on the supply chain," says Betsy Hargus, director of marketing for Prescient Applied Intelligence, Inc ., a leading supplier of advanced commerce and supply chain solutions. "People tend to place a lot of significance on this holiday, and if there aren't enough caramel hearts on the shelf, that can lead to heartbreak."
To get a better understanding of how this can happen, let's take a look at how chocolates move through the supply chain, particularly brands with a peak season like Valentine's Day.
A box of chocolate's life story goes something like this:
Using data from various sources, including the point of sale, the supplier forecasts how many boxes of chocolate they'll need to place on retailers' shelves for the holiday, and based on a variety of metrics, they come up with an order.
Once the order is generated, the products are manufactured and shipped to retail stores, often through a third-party distribution company. Once the chocolate arrives at the store, shelves are stocked and finally, that little box of chocolate is ready for customers to buy.
This all might sound fairly straightforward, but one misstep in the supply chain can trickle all the way down to impact the store shelf, and ultimately the customer. A mistake somewhere along the supply chain means you might be sleeping on the couch on February 14.
An accurate order is the most vital part of the process. If an insufficient amount of product is sent to retailers, they could quickly run out of candies . . . and since replenishment can take weeks, there would be no time to order additional chocolates before Valentine's Day.
Without supply chain solutions that can help to anticipate future demand, the ordering process can turn into a guessing game with only previous years' sales data to gauge how many boxes to order . . . and unfortunately, Excel sheets can't predict demand. Seasonal promotions and sales can change shopping behavior from year to year, and if all parties are not in the loop on planned promotions, the forecast won't reflect this potential sales increase.
Ordering too much candy poses the opposite problem: chocolate is a perishable product, so if the boxes sit in a warehouse or on shelves for too long, they won't be in sellable condition.
In addition, hold-ups in shipping, bad weather . . . all of these things can also affect whether you'll be able to please or disappoint your sweetheart.
VMI and Russell Stover: the
So what can companies do to make sure they aren't getting customers in trouble with their other halves on Valentine's Day? Hargus recommends that sweet-makers follow the example of the country's number-one producer of boxed chocolates, Russell Stover , by employing supply chain solutions that help to reduce out of stock issues.
"Russell Stover knows that supply chain management can make or break important Valentine's Day sales," she said.
Russell Stover recently implemented Prescient's
"In the past, we used a forecasting system that made predicting seasonal demand a challenge," says Stacey Churchill, VMI Manager for Russell Stover. "With Prescient's VMI program, our forecasting accuracy has greatly improved and we've seen a significant decrease in out of stocks, especially during key holiday seasons."
That's a sweet success for Russell Stover, and for lovers everywhere.