All of the top 12 largest supermarkets in the UK are subject to GSCOP (Grocery Suppliers Code of Practice). With reference to forecasting these guidelines state that supermarkets must "fully compensate" for any costs incurred as a result of a forecasting error[1]. They also state that suppliers must be told the grounds on which a forecast has been prepared by the retailer.
Whilst the above is in theory, moderated effectively, the reality is that forecasting was highlighted as one of three top issues in the 2017 - 2018 annual report[2]. Issues included variations between forecasts, inaccurate forecasts and failure to meet service levels.
To paraphrase, the GCA (Grocery Code Adjudicator: Christine Tacon) stated that different retailers adopt different approaches to forecasting. Some retailers saw it as a discrete activity, whilst others saw is as a crucial part of supply-chain management. Some suppliers even did their own forecasts which they shared with the retailer encouraging a more collaborative approach.
So, the problem is not with the rules, per se, but rather the definition of forecasting (as discussed in our previous blog). Particularly as it is used in different ways by different people in terms of both content and time span.
The above has resulted in the GCA asking retailers to make their forecasting communications more transparent. The GCA have encouraged ‘’closer collaboration’’ from both parties so that more accurate forecasts can be developed, whereby suppliers can raise discussions with the retailer should they deem it necessary.
The first step towards collaboration clearly requires a common language; an understanding of what is meant by “forecast” and a shared set of data on which to make decisions. Furthermore, that data needs to be at such a granular level that suppliers can make decisions about the production and distribution of their products at SKU level.
Further steps to successful demand forecasting are listed in our comprehensive guide, which discusses all of the above and more in great detail! You can download it completely free of charge here “Grocery retail suppliers – 4 critical elements for successful demand forecasting.
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Ed started his career as a data analyst at a market research company working with FMCG suppliers to grocery retail, followed by several years heading up a team of data and consumer behaviour analysts. He joined Atheon Analytics in 2009 where he built the development team before moving into his current role as Product Manager.
Atheon helps FMCGs and Retailers to make better use of their ‘Flow-of-Goods’ data through their SKUtrak service.
