Gaining deep visibility into sales channels and a timely understanding of every detail about product shipments is essential to modern businesses. Granular knowledge – about what items were sold, who sold them, who bought them, where they are now, and whether they’re being returned – gives manufacturers an edge in optimizing the final mile of the supply chain. That information is known as channel data, and the tools used to gather and manage that data are known as channel data management systems, or CDM.
Supply chain professionals typically manage the supplier interface and the movement of products from manufacturing into the distribution warehouse. From there, channel sales managers direct the movement of inventory to the distributors and resellers who fulfill the products to end users. Too often, supply chain and channel management teams operate separately and don’t communicate with each other at a detailed level. Business process experts now suggest that when the visibility into these two areas is combined or managed in parallel, a more effective environment is created that delivers on the promise of a truly data-enabled enterprise.
The highest value of deeper channel intelligence, when shared and consumed throughout the enterprise, is in the illumination it provides to areas that were previously invisible to senior executives. By synthesizing supply chain and channel sales / inventory data, companies can answer critical operational questions. What do the numbers from the first month of sales say about demands for manufacturing capacity? How will global trends in the distribution channel impact the need for operating capital? Is product planning suppressing sell-through? How are competitors answering these questions? How many days of inventory exist in the channel?
Big data and analytics drive value by leveraging information that already exists both internally and externally, from an end-to-end perspective. Channel and reseller data becomes more widely actionable, not only by the sales and marketing groups, but also by manufacturing, planning, finance and senior management. This is especially useful in maintaining more effective supply chain management by extending visibility well beyond the distribution center through the entire sales channel and to the point of end-user purchases.
Improved Visibility = Better Planning and Control
Enhancing supply chain visibility by integrating channel sales and inventory data provides significant advantages that can help reduce costly stock-outs or aging inventory, and delivers valuable information that more precisely guides the manufacturing process up and down the supply chain and sales channels.
Many manufacturers use a combination of historical sales data, feedback from optimistic salespeople, and best-guess management estimates as the basis for hard-cost plans to build and ship products into the channel. Enhanced visibility can eliminate serious issues that have plagued some of the world’s largest manufacturers. Most inventory write-offs could have been avoided, channel data specialists say, if supply chain planners simply had better channel inventory data.
Headline-getting inventory write-offs like Microsoft's $900m or BlackBerry's $1bn, highlighted by massive inventories of unsold inventory, aren't necessarily the result of poor product quality, but of sub-standard planning based on a lack of full visibility into sales and distribution channels. This channel opacity results in fire-sale losses and long-lasting harm to brand value, from which even the most market-savvy companies can have trouble recovering.
Integration between supply chain and channel data management is an essential part of preventing these types of potential disasters. Comprehensive channel data notifies the earlier phases of the manufacturing and supply chain to make sure products that aren't going to capture high margins are manufactured from the beginning at an appropriate volume.
Multi-step distribution is used by some manufacturers to generate the majority of their sales, particularly in the tech industry. Surprisingly, even some of the largest tech companies – many with massive global channel programs – still rely on guesswork and “back of the envelope” feedback from the field to understand what inventory exists beyond the distribution center and within the warehouses of distributors and resellers.
Having visibility on a deeply granular level allows companies to take corrective action regarding inventory build-up or inventory that is selling rapidly. Detecting inventory build-up in one individual territory, for example, might trigger additional hyper-local promotional and marketing activity to correct the situation.
On the other hand, seeing shortages in one area could indicate a need for an increase in manufacturing output into the channel or a diversion of inventory from a region with slower sales.
A richer level of demand-side information yields a more complete model of the supply chain. Many companies, although they may be using costly and sophisticated supply chain software systems, model their manufacturing operations based on information about raw materials, plus what exists at the plant site and the distribution centers – a myopic "four walls" approach that is quickly becoming obsolete.
Broadening the Scope
Adding channel data management to this collection of information extends management visibility all the way to the store level. Many supply chain systems do offer sophisticated visibility within a limited sphere, but lack the ability to reach into the channel to collect the extended level of data necessary to get a complete picture.
Many firms rely heavily on their channel partners for their go-to-market strategy, but leave both the relationship with the end user – and the data-driven oversight – to the partners. This is a short-sighted approach in an extended supply chain.
A greater level of visibility has become essential to strategic markets, especially in an environment that is witnessing shrinking product lifecycles, more competition, and a lack of quality channel data. That lack of visibility into downstream sales and inventory comes with huge costs.
Mandatory channel sales reporting for regulatory compliance has been around since the early 2000s, and yet there is still no standard industry platform. Most attempts at building in-house systems and processes fail due to the absence of data management skills, partner identity information, and a lack of global scalability. The problem is even greater at Fortune 500 companies with multi-product, multichannel, and multi-geo businesses, plus those selling higher value, short-life products.
Bringing It All Together
Comprehensive, accurate visibility into what's going on outside the manufacturing company’s walls – and external visibility into the distributor and reseller-level inventory – is often not integrated into present-day supply chain management systems.
In addition to improved forecasting, integrated supply chain and channel visibility offers deeper details about whether a stock-out or aging inventory situation within the channel is imminent, leading to better management of inventory levels in the channel – and as a result, better use of capital and a reduced likelihood of costly write-offs or other extreme actions.
Integrating channel data into the supply chain provides an early warning system that gives management better decision-making information about sourcing raw materials and early-stage commitments to the manufacturing process. At the end of the day, a company can't manage what it can't see, and without deep, granular visibility beyond the inside of the organization, manufacturing planners are flying blind. Gaining insight into rich, global channel data is increasingly becoming a vital part of supply chain management, enabling better decisions and greater profitability.