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In recent years there has been increasing use of Point of Sales (POS) data by both manufacturers and retailers to gain insight into consumer behavior. Therefore, it is important to know what POS data is, from where the data comes, and how to reconcile shipments with consumer takeaway to reduce inventory and increase sales and profit.
WHAT IS POS DATA?
POS data measures the last part of the supply chain - how much product the ultimate end-users purchase. In other words, how much cereal shoppers buy from grocery stores; how many cars consumers buy from local dealers; and how much paint people buy from Home Depot, Lowe's, Wal-Mart, and hardware stores. This is what occurs at the far end of the supply chain, so there are other measures (elements) to be forecasted for different points throughout the supply chain. Let's review those first. The two most popular measures used in forecasting are orders and shipments. Orders capture the amount of product that customers want from a supplier, while shipments capture the amount of product that is actually shipped to them by the supplier. A few examples of orders are:
* Kroger places orders for cereal with General Mills and Kellogg's, which in turn ship products to Kroger's warehouses (or possibly directly to their stores).
* Main Street Chevrolet places orders for cars with General Motors, which ships cars to Main Street Chevrolet.
* Home Depot places orders for paint with either paint manufacturers or distributors, which ship directly to Home Depot.
In an ideal world, orders would always equal shipments, and the fill rate would always be 100%. Of course, that is never true because of various hiccups that occur between an order getting placed with a supplier and the supplier's ability to provide the desired quantity of product at the desired delivery location at the desired time. Fortunately, most fill-rates are in the range of 95% and higher, so orders and shipments usually line up quite well. The most common reason for differences is probably when the supplier has an out-ofstock situation.
Figure 1 illustrates how POS data is related to orders and shipments. If a supplier sells its product directly to people or companies that ultimately use the product, then the shipments...