Reimagining Product Allocation in a Volatile World

The only constant in life is change. But none of us anticipated the pandemic storm that swept into our lives in 2020, leaving in its wake an unprecedented supply chain volatility. As the months took their toll, our course was clear: to offer a way to share experiences and recommendations on how to react and respond to the Black Swan event that massively affected supply chains on a global level.

The result was our phone-a-friend lines, a core part of our COVID-19 relief program. From the start, we were awed at how swiftly and decisively our clients stepped up to the plate to confront then ever-before-seen challenges. We witnessed organizations reinvent themselves seemingly overnight as people from all functional areas stepped up to man the helm. We watched enterprises work furiously to catch the tiger by its tail and focus efforts in the areas that served the most pressing needs of their customers. It was a herculean effort on the part of our clients, and it set the stage for embracing, rather than wresting with, the change.

Fast forward to two years later. Today, are still faced with unparalleled challenges as we strive to ensure assurance of supply at a time when workforce, transportation, and human beings are adjusting to the new normal that still feels not at all normal. Many of us are still struggling to get our rules right so we can address constraints and extended lead times.

A popular recurring theme in our phone-a-friend calls remains Product Allocation, which lets us control how much product a customer is eligible to receive at the time of order entry. It works off a flexible planning structure that enables us to model the strategy for how we want to place our products in the market. When we first dip our toes into Product Allocation, the first way we think about is how to structure our rules, typically by customer account or account group.

Traditionally, the focus of Product Allocation has been to help manage limited release items: things like luxury items, collectibles, promotional releases, pre-releases, new product introductions, and so forth. But buying behaviors suddenly switched beginning in 2020. With the constraints of manpower and material availability we’re experiencing now, the desire to use Product Allocation to manage where our products are going has boomed. The result is that many of us are now rethinking our strategy.

Let’s say, for example, that we work in an industry that is focused on products that are a bit more commoditized or consumable: soup, wine, meat, cheese, masks, paper towels or toilet paper. Does Product Allocation have a place in managing through longer term constraints in the supply chain? Could we rethink our allocation strategy to go beyond “who” to embrace “where?” If we consider the end customer, and how we want to present ourselves to the market, might we focus on states or regions, or even a combination of region and market size/tier to ensure that we maintain a presence to the end customer? Are we in a position to set up a structure that we can commit to that still has the flexibility in maintenance to adjust our percentage in allocation allowance based on market conditions and business needs?

When it comes to Product Allocation, many of us are stand at the precipice of the type of reinvention that is born out of disruption. We’ve been manually intervening to meet the needs and manage our back orders, but we lack the rules engines in the system to support our strategy in a way that is consumable by the business in terms of care, feeding and maintenance.  

The conventional thinking has been challenged and the opportunities are real. That being said, Product Allocation is but one tool in our Order Management toolkit. To get the application of that tool right, we want to make sure that we are looking at other tools like Backorder Processing, Rescheduling, Sales Order Monitor, and our ATP scopes of checks with or without Total Replenish Lead Time (TRLT). This toolkit has synergy and provides a new way to tackle the challenges we’re facing.

If you are interested in exploring this topic further you can access our Webinar on, "Turning SAP into an ASSET by…​ Increasing Customer Satisfaction & Product Availability" or download our White Paper, "Confidently Make a Promise to Your Customer and Keep It - Every Time".