The term Predictive Commerce has been brought forward in the context of connecting up and downstream, Omni-channel product demand sensing with an integrated, single-model, end-to-end supply chain planning and execution. In some sense, it can be viewed as an enhanced iteration of demand-driven supply chain response capability for complex distribution and long-tail product demand environments. hands-typing-2 Supply Chain Matters is of the view that this capability warrants further consideration by supply chain and sales and operations planning (S&OP) teams, in the context of a transformative effort requiring careful thought and investment.

Predictive Commerce was most recently brought forward in a recent published white paper from supply chain planning technology provider ToolsGroup, titled Predictive Commerce: Helping Companies Return to Growth.

This paper defines such capability as:

Predictive Commerce is a strategy that enables this shift (in planning methodologies) and revolutionizes the way companies think, see and plan their end-to-end supply chain. It connects supply chain strategy, planning and execution into an end-to-end planning process. The key technology enabler is a single underlying model”

This paper describes examples of predictive commerce applications that include real-time product demand sensing linked to dynamic replenishment processes. The example brought forward is a large coffee shop brand, namely Costa Express, leveraging machine telemetry feeds from 3000 self-dispensing coffee machines to trigger coffee bean, cups and flavored syrup replenishment needs among supporting distribution replenishment centers. In another retail industry example, product demand sensing is linked to dynamic replenishment and product segmentation to minimize last mile delivery costs by utilizing existing channel inventories. A further example is connecting product demand sensing and predictive orders with the needs for transportation capacity and optimization.

We concur and re-iterate that the most important takeaway for industry supply chain teams to ponder is that Predictive Commerce or other similar type capabilities that fuse supply chain planning and execution in a single information model require a transformative strategy that brings together such capabilities.  This is particularly important in an environment where  legacy applications or ERP backbone systems were implemented under the notions of planning and execution being two separate hierarchical processes and data sets that fed different  information streams back and forth. Today’s Omni-channel and online fulfillment demand streams are far more concentrated in SKU level and location specific planning and execution dimensions. That implies a single data model with far more granular data and information streams as well as requirements to plan inventory investments at multiple tiers of the supply chain.

The good news is that advanced information technology now available in today’s marketspace can provide such capabilities in a less disruptive manner.  A single data model approach opens far more enhanced capabilities in leveraging analytics and deeper supply-chain wide intelligence. It further paves the way for the ability to leverage more predictive and prescriptive planning methods for supporting near real-time customer fulfillment execution requirements.

In addition to technology, there are important people and business process elements to consider in such a transformation.  Business processes, whether internal or externally focused, need to be well understood by all participants and have an “outside-in” perspective.  Deep collaboration among customers and suppliers is essential.  Do not neglect the change management and skills impact for people in managing an overall supply chain environment. Especially those that are driven by complex by faster-moving, exception-driven events vs. day-to-day sequential business processes.

Predictive Commerce can indeed be a meaningful competitive differentiating capability for distribution and online fulfillment sensitive supply chains. Such a capability requires a transformative strategy, often aligned with supply chain segmentation. It is indeed a “crawl-walk-run strategy anchored in people, process and advanced technology.

Bob Ferrari

© 2015 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters® blog.  All rights reserved.

Disclosure: ToolsGroup is a current client of Supply Chain Matters ® parent, the Ferrari Consulting and Research Group LLC.