Supply Chain Planning Components for Private Label Success
Private label manufacturing is a demanding discipline characterized by high service levels, thin margins, large SKU counts, and little room for error, making accurate demand forecasting even more crucial. Despite these challenges, from packaged foods in the grocery aisle to fashion-forward apparel labels to panoramic dedicated brands like Martha Stewart housewares, private label products are not only here to stay, they are often positioned to prevail.
The advantage to retailers with store brands has been well understood for years (differentiation, customer satisfaction, brand loyalty, better margins and value). By now, most consumers have tried private label products and realize that an industry-wide shift has happened. Consumers now perceive that private label products deliver as good or better quality as national brands at more affordable prices. Private label goods are usually priced 20% or more below the market leader, and Private Label Manufacturing Association research reveals that American shoppers consistently save about 35% off their grocery bills by choosing store brands over national brands—chalking up some $32 billion in annual savings.
For the manufacturer this opportunity comes with a big challenge: more total SKUs, with lower production volume per SKU, is a recipe for inefficiency, inaccuracy and expensive, reactive decision-making. Maintaining service levels on brands that directly shape a retailer’s core reputation requires the crucial disciplines of demand planning, demand forecasting, inventory optimization, manufacturing planning and replenishment planning (perhaps with vendor-managed inventory) and the ability to balance and align supply to fluctuating demand across multiple time horizons.
This white paper describes how private label manufacturers are mastering the art of customer collaboration and the science of demand forecasting, inventory optimization and manufacturing planning to combat the traditional challenges in this industry (more total SKUs, with lower production volume per SKU) and experience robust, year-over-year growth.