retail supply chain research

Understanding

the role of

weather in the

supply chain

October 2015

www.metoffice.gov.uk/retail

http://www.metoffice.gov.uk/retail

While UK retail sales have been enjoying a period of

steady growth, with volumes rising for the 27th

consecutive month and growing 4% year on year, they

continue to be held back by the underperformance of the

food sector.

Retail sector growth is being hampered

Retail Economics: Retail Sales

Report - July 2015

Sales in the food

category fell by

0.1% in June 2015,

down from +0.6%

in the previous

month

Understanding the role of weather in the supply chain

The food sector is facing a number of unique

structural challenges which are holding back growth

in this category:

• Shopper behaviour. There has been a fragmentation of demand across

multiple channels coupled with growing customer expectations

• Retail environment. Competition has intensified amongst the major

supermarkets, with the likes of Aldi and Lidl gaining a larger slice of market

share by offering lower prices

• External factors. An increase in seasonal weather extremes, fragile economic

recovery, as well as the growing need to reduce food inventory and waste


The weather is an

essential, but often

overlooked, factor for

retailers and suppliers

looking to increase

consumer advocacy

and drive competitive

advantage.

Barbara Napiorkowska-Dickson,

Met Office

“

”

Met Office report key findings


In order to better understand the impact of the weather on shopper behaviour

and supply chains, the Met Office undertook research among supply chain

managers and executives to draw out valuable insights and implications for

the role of weather in the industry.

Our research consisted of:

• An online survey responded to by over 240 senior managers and

executives, across many well-known industry organisations

• Views from retailers, suppliers and third party logistics providers, with the

majority in the food and grocery industry

• Cross-functional representation with the majority of respondents involved

in planning

Forecasting demand accurately is the most important

function to get right in the supply chain in order to deliver

its primary goals of great product availability for customers,

low inventory and low costs, including reduced waste.

Despite the investments and improvements in forecasting

systems, intelligence and data analysis, forecasting is

getting harder due to supply chain complexity.

Retail Economics: Retail Sales Report

- July 2015 “These are the most challenging conditions in 30 years.

Customers have never been so savvy.”

CEO of a major grocery retailer


Is forecasting demand getting harder or

easier?

Forecasting and planning are key to success

The weather was ranked the 3rd most important factor

external to their business that drives consumer

behaviour, for 47% of all respondents in the study.

Sales in the food category fell by 0.1% in June 2015, down from +0.6% in the previous month

Retail Economics: Retail Sales Report

- July 2015

The weather has a significant impact


What are the top three factors, external to your

business, that drive end consumer demand?

“It is not enough to consider an average

weather or temperature for the whole day. For

example, if it's sunny at lunch and rains later

you can sell 20% more sandwiches than if it

rains at lunch and may be sunny later.”

Senior supply chain manager - national retailer 47% The weather

53% • Events/ holidays

• Competitor activity

• The economy

Weather data driving end-to-end decisions Inline with retailers’ and suppliers’ key priorities, weather forecasts

are currently used to support a broad range of decisions and

activities in the supply chain like sales forecasting, planning stock

availability and promotions, and managing deliveries/ logistics.

By far the most common application of the weather forecasts is to

the short term sales forecasts which drive so much of the upstream

planning and activities.

There is also a clear desire from supply chains to use the weather

forecasts more broadly within their businesses, particularly to drive

commercial benefits – for example through forecasting footfall and

online traffic and planning marketing campaigns.


What weather factors are taken into consideration

in your forecasts/ planning?

Only 16% of respondents are using a commercial weather forecast,

with 19% relying on free data.

Integration of weather data

Retailers are much more likely than suppliers to use commercial

products (27% versus 11%). They sell a wide range of products, at least

some of which are likely to be weather sensitive. Suppliers have a

narrower portfolio and, for some, their business may be less affected by

the weather.


What weather products or data do you

use in your business?

Organisations may assume that their products are not weather sensitive,

but their business most certainly is. It is too simplistic to just take a

product-facing approach – the weather will always have an impact on

their sourcing and logistic operations and their sales and marketing

activity.


Different weather factors in planning

The most commonly used weather factors in planning are varying

measures of temperature – maximum, average and minimum –

which have the strongest impact on consumer demand.

Extreme bad weather events, whilst also impacting consumer

demand, tend to have just as important an impact on logistics such

as supply and delivery. For example, snowfall and ice can

potentially prevent or delay the delivery of products to the

supermarkets, while one packaging supplier said that adverse sea

weather can add 5-6 days to a shipment.

The weather that retailers

care about is temperature,

sunshine hours and extreme

events. For their historical

analysis they look at average

temperature at the weekend

and they would also look

at this by UK region.

Head of planning at private label

manufacturer

“

”

Benefits of using weather data Retailers

Better on shelf availability – linking back to the aforementioned

ability to predict consumer demand – was identified as the most

prominent benefit, and chosen by 81% of respondents. Better sales

forecasting (62%), less waste (57%) and better customer service

(43%) were further key benefits identified.

Suppliers

Better customer service (69%) was identified as the leading benefit

for suppliers by a significant margin. This was followed by the

ability to better forecast sales (56%). Better on shelf availability and

less waste (both 39%) were also identified.


What benefits have you received from using

weather data?

Those who paid-for weather forecasting products on average

identified a larger number of benefits to their company from

weather forecasting compared to those who relied only on free

products.

Satisfaction greater with paid-for data A key outtake from the results was that those who paid for weather

forecasting products on average identified a larger number of

benefits to their company from weather forecasting compared to

those who relied only on free products.

Overall, retailers were much more satisfied than suppliers by using

weather data. There were also significantly different levels of

satisfaction between those who use free weather data and those who

use paid-for data.


What benefits have you received

from using weather data?

As demonstrated in the research findings, the influence of the weather on

shopper behaviour, including its impact in demand planning, is increasingly

recognised across the retail industry.

It is too simplistic to just take a product-facing approach – the weather will

always impact your sales and marketing business in some way.

Organisations get far more out of paid-for data, citing improved customer

service, better sales forecast accuracy, better on-shelf availability, lower

inventory and less waste – the key priorities of most supply chains.

Using advanced weather data is a significant opportunity for organisations to

improve supply chain and operational efficiencies for British retailers and

suppliers. We hope that these insights will drive a shift within the industry to

incorporate more weather data within demand planning.


Barbara Napiorkowska-Dickson,

Met Office

The influence of the

weather on shopper

behaviour, and the

importance of

including its impact in

demand planning, is

increasingly

recognised across the

retail industry.

Summary

“

”

About DemandMet™

The Met Office is ideally placed to provide forecasts for retailers and suppliers

to help them drive efficiency across the entire supply chain. DemandMet™ is a

tailored weather forecasting service that can help improve product forecasting

and, as a result, on-shelf product availability.

The service, based on world leading weather forecasting capabilities, puts

weather into the context of the industry and focuses on interpreting how it feels

and evolves over time.

For more information, and to download the full report, visit

www.metoffice.gov.uk/retail


Questions? Comments? Great ideas? We want to hear them. Find us on LinkedIn or tweet @MetOfficeB2B








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