Tomorrow is the release of Season Six of Fox’s 24. And next Tuesday on December 11^th we will see the release of ABC’s LOST Season 3. These are, in my opinion, the two best programs on television today. And I, along with millions of consumers, will be rushing to stores in during the holiday season to buy these new DVDs along with other releases such as Harry Potter and the Order of the Phoenix; Pirates of the Caribbean at World’s End; or Shrek the Third.

Amongst the topics on the minds of me and my fellow DVD shopper’s minds are:

· New Seasons - Will the Screen Writers Guild strike affect the new seasons of 24 and LOST starting after the New Year? Or will we spend this upcoming spring watching the DVDs of last year’s seasons rather than new programs?

· LOST - Will the distress call Jack placed to the nearby ship be answered by friend or foe?

· 24 - Will a city other than Los Angeles actually be the target of attack? Will Kim Bauer finally be written out of the plot?

Covers of the new DVD releases:

But I doubt many, if any, of the shoppers stop to consider:

· Product Availability - How does my retailer know how many of each DVD to have in stock so that when I come into the store I will be able to find the title I want?

Herein lays an interesting challenge unknown to the average consumer. Home entertainment products such as DVDs as well as their peers in the CD and video game categories have some of the more complex supply chains in the retail sector. One of the biggest supply chain challenges is in the area of new product introductions. For DVDs, up to 80% of the sales of a product typically occur in the first few weeks after the product launch. As a result, ensuring that products are always available on retail shelves is critical for both home entertainment brands and the retailers who sell them. Out-of-stock scenarios for DVDs can often result in a lost sale. Each lost sale can represent between $3 and $6 potential profit. Eliminating out-of-stocks is more challenging than one might expect. Each DVD title has its own unique demand characteristics. Retailers and brand owners are challenged to estimate launch time sales as they have no historical demand pattern to build forecast models. The supply chain challenge grows more complex when one considers that for each title, there may be multiple SKUs. Each DVD launch typically includes a widescreen and standard format version as well as HD-DVD or Blu-Ray formats.

So how do retailers replenish their stores with DVDs? The process works as follows. Each night the retailer aggregates point-of-sale data from its stores and transfers the information to the brand owner. The sales consumption data along with last-known store-level inventory positions are utilized to assess stock positions at each individual store. The data is then fed into a replenishment application which can calculate SKU-level stocking needs for each location. The calculated replenishment quantities are used by companies called video duplicators to manufacture the actual physical DVDs. The shrink-wrapped product is then routed by the duplicator or a third party logistics company directly to the retail stores. As a result, consumers can expect to find the title of their choice at their local retailer.

Of course, the key to this whole process is the ability for retailers, brand owners, video duplicators and third party logistics companies to share point-of-sale, inventory and logistics data amongst one another in a timely manner. Sometimes the entire replenishment cycle can be as short as 24 hours, but this is necesary to ensure sales are not lost to out-of-stocks. This is an excellent illustration of how the B2B technology is used to power complex, demand driven supply chains. And those retailers and DVD manufacturers who can master these B2B processes will gain a competitive advantage over their peers by suffering fewer out-of-stocks and maximizing sales of new product introductions. All of this is yet another example of EDInomics at work…

Steve Keifer

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