Finding the True Voice of the Customer in CPG Supply Chains: Shopper‐Centric Supply Chain Management

• Published date: 01 September 2014
• Author: Marcel M. Zondag,Bruce Ferrin
• DOI: http://doi.org/10.1111/jbl.12055
• Date: 01 September 2014

Finding the True Voice of the Customer in CPG Supply Chains:

Shopper-Centric Supply Chain Management

Marcel M. Zondag and Bruce Ferrin

Western Michigan University

Demand and supply integration is the subject of increasing scholarly attention. The theoretical emphasis on combining market and supply

chain data as the basis for strategic and operational decision making is particularly relevant in the context of Consumer Packaged Goods

(CPG) supply chains, and offers the basis for advancing our understanding and knowledge in this field. Point-of-sale (POS) data are commonly

used as the demand signal in CPG supply chains. Using empirical data, this research demonstrates that POS data can be influenced by nonde-

mand factors. We present a number of issues raised by this finding.

Keywords: demand and supply integration; point-of-sale data; supply chain risk; voice of the customer

CONCEPTUAL AND THEORETICAL FRAMEWORK

Mainly because of space restrictions, grocery retailers limit the

number of brands and product varieties available for sale on their

store shelves. Category management is the strategic merchandis-

ing tool, which retailers use to make assortment decisions for

each product category (Barrenstein and Tweraser 2004). In-store

execution, or shelf restocking, is the operational process used to

move inventory from the stockroom (“back-of-the-store”) to the

shelves, making items available for purchase by shoppers. Previ-

ous research (e.g., Murry and Heide 1998; Raman et al. 2001;

Immink et al. 2004; Fisher et al. 2006) shows the importance of

effective and efficient in-store execution for achieving desired

levels of On-Shelf-Availability (OSA) of products. As Trautrims

et al. (2009) argue, high OSA is a necessary condition for retail

sales performance.

Consumer packaged goods (CPG) are low-involvement items

for shoppers (Zaichkowsky 1985). Therefore, purchase decisions

can be easily influenced by marketing stimuli in the store (e.g.,

sales displays, etc.), the ease with which shoppers can locate

items, and ultimately, the availability of product on the shelf

(Broderick and Mueller 1999; Sorensen 2009). Thus, OSA is a

critical variable that must be effectively managed, to satisfy

shoppers’primary or first choice demand, that is, those items

shoppers are looking to purchase when they enter the store and

expect to be part of the store’s regular assortment (Trautrims

et al. 2009; Vulcano et al. 2012).

Traditionally, in CPG supply chains, point-of sale (POS) or

checkout scanner data provide the basis for replenishment

decision making (Grewal et al. 2009; Cooke 2013). Based on

these historic sales data, firms develop demand forecasts on

which production and inventory management planning are based.

In effect, by using past sales as a predictor for future demand

this approach “pushes”inventory to market (Sandelands 1994) in

order to have products available when shoppers arrive in the

store.

Williams and Waller (2010, 2011) find that using POS data as

the basis for replenishment planning reduced forecast errors com-

pared to using warehouse depletion data. However, retail POS

data, theoretically, could only provide a completely accurate repre-

sentation of first choice demand when a retailer’s product assort-

ment includes every variation of every CPG brand available and

when in-store execution consistently achieves 100% OSA. Only

under these optimal conditions would a shopper be guaranteed to

find whatever they were looking for during every store visit.

Therefore, given the category management-driven assortment deci-

sions and in-store execution issues affecting OSA, shoppers’actual

purchases could be an incomplete depiction of first choice demand,

reflecting instead items shoppers purchased based on what was

available to them during a specific shopping trip (Campo et al.

2003; Campo and Gijsbrechts 2005). Based on this observation,

Vulcano et al. (2012) developed a method to approximate first

choice demand based on the estimated market share, product avail-

ability, and sales data from a particular retail location.

The challenge of efficiently and effectively (i.e., profitably)

meeting customer demand is the impetus for recent research

advancing the concept of demand and supply integration (DSI)

(Juttner et al. 2007; Esper et al. 2010; Stank et al. 2012). The

main characteristic of DSI is the strategic collaboration between

the customer-facing and supply chain-facing functions of firms in

a supply chain. DSI suggests that a collaborative approach to

acquiring and sharing market intelligence and supply chain oper-

ational data within and among firms will improve the perfor-

mance of both marketing and supply chain processes (Esper

et al. 2010), providing a competitive advantage over other less

collaborative supply chains.

Esper et al. (2010) contend that supply chain managers should

collect demand data to use as the voice of the customer (VOC)

and operational data showing the capability of the firm’s supply

chain, called the voice of the supply chain (VOSC). Replenish-

ment is managed based on integrating VOC and VOSC data

(Esper et al. 2010). To apply DSI in a CPG supply chain, the

customer-centricity fundamental to value marketing (Ballantyne

and Varey 2008) must be extended across all echelons of the

supply chain, effectively replacing traditional manufacturer-dri-

ven push replenishment with customer-centric pull replenishment

(O’Marah 2005; Cooke 2013).

Corresponding author:

Marcel M. Zondag, Department of Marketing, Haworth College of

Business, Western Michigan University, 1903 W. Michigan Ave.,

Kalamazoo, MI 49008, USA; E-mail: marcel.zondag@wmich.edu

Journal of Business Logistics, 2014, 35(3): 268–274 doi: 10.1111/jbl.12055

© Council of Supply Chain Management Professionals