Supply Chain Management

Today’s news headlines are largely depressing reading. So this weekend I steered away from the newspaper and in fact picked up a relatively new strategy magazine [which will remain nameless]. The magazine headlined a story “Top 7 ways to increase sales” and provided assorted articles on marketing/ how to increase revenue etc. Flicking through the magazine I was pleasantly surprised to see a section dedicated to Supply Chain but was simultaneously disappointed to see only four pages of commentary [out of a total sixty-six pages]on this very strategic lever!

A recently published Supply Chain analysts report also indicated that many companies have begun to recognize the Supply Chain as a strategic differentiator rather than just the cost of doing business. This is validation of my opinion that “The Supply Chain” provides the highest return for a company’s transformation dollar in terms of [shareholder] value created. This is specifically true for any company in an economic downturn.

The Share holder view of the Supply Chain is inextricably linked to margin protection or expansion. In reality supply chain initiatives and projects drive value in equal measure from cost reduction and top line growth. Most managers will recognize this to be true. Let’s consider an - example of how Infosys helped a large CPG Company understand top line impact of a Supply Chain investment.

Supply Chain drives increased RevenueIn a recent project at a large CPG company, Infosys was engaged in helping the client evolve a business case for making significant improvements in their retail fulfillment [Demand] chain. Over 50% of the revenue is driven by different [sales and marketing promotion] events. As you can imagine, this causes significant volatility in their supply chain resulting in unfilled orders and poor on-shelf availability.

Effectively, this was a double whammy. On the one hand the client lost sales while on the other hand they spent trade promotion dollars and did not achieve the estimated lift projected. I have not even started to mention the costs as a result of the inventory build-up in the supply chain because a special product missed a promotion window.

Similarly, in today’s economy, most industries [read value chains] are global in scale. The supply chain can be a source of significant competitive advantage – providing advantages other than lower cost. In the example above a key outcome of the successful implementation of advanced planning capability would be improved fill rates and customer satisfaction (CSAT). While CSAT clearly impacts the top line, it is a major advantage if your supply chain is geared to meet customer requirements more effectively than your competition. This is a simple enough concept …

Essentially, my point is that a supply chain organization must consider itself as much a driver of the top line [through increasing revenue] as the bottom line [through reducing cost and working capital]. Most importantly, the supply chain organization is a source of lasting competitive advantage…

In an economic downturn Supply Chains will see more of the following:

1. Reduced volume [material flow through] – falling net demand
2. Volatility of demand – as customers try and forecast changing demand trends
3. Intensifying competition - unreasonable performance demands on Supply Chain
4. Shrinking capacities and failing suppliers in the supply network – increasing supply risk

I would propose that a weak economy is an opportunity for the enlightened Supply Chain leader to rethink strategic priorities in the context of the competitive landscape in a recovery cycle. It is critical to do everything to “keep the lights on” [KTLO]. However, the changed economic circumstances should be leveraged as an opportunity to transform the supply chain to become more agile and responsive. Position the company for when the economy starts to recover - Do not shrink your supply chain capabilities in a haphazard fashion but retreat in an organized way with an eye to economic recovery. Plan to “win in the turns”…

 

 

 

Easier said than done – That is true. But here are four capabilities to think about. Each, while helping cope directly with the economic down turn also enables the company to build advantages it can leverage as the economy recovers…carrying momentum to leapfrog competition in an improved economy.

1. Making your supply chain more “Collaborative” implies
   a. Ability to build -execution plans that incorporate inputs from within the organization [product development/ sales and marketing and finance]
   b. Ability to capture planning inputs from customers [extended value chain] and share the plan with an extended supply base
   
   
2. Making your supply chain more “Responsive” implies
   a. Ability to capture changes to plan from supply network and customers
   b. React swiftly to new inputs  [smaller order sizes, LTL capability, order changes etc]
   
   
3. Making your supply chain more “Agile” implies
   a. Visibility to supply chain performance

Posted by Saurabh Agrawal at 03:08 PM | Permalink | Comments (2) | TrackBacks (0)

Thanks to my involvement last month in devising an enterprise application strategy for a food supply chain major – experience is detailed here and here - I had the opportunity to understand the food commodity market a lot better. And like any other market, the forces of Demand and Supply are much at play to decide the market price equilibrium. Let’s look at those forces on the back-drop of the unprecedented food prices last year and then see the impact of recession on these forces. A run-down on the demand forces at play first:

Surging Population is a catch-all reason for anything & everything, including, in this case, high food prices. But more than that, it has been the rise in affluence level in developing economies that has led to an increase in demand for higher protein foods such as meat & seafood. This changing consumption pattern led to an exponentially greater demand for grains and protein feeds.

If surging population is the time immemorial cause, high crude prices was the flavor of last year. The spiraling crude prices increased the input cost via high fuel cost for farm equipments & high fertilizer cost. Farmers had no choice but to pass-on the cost to the consumers. Also, the controversial bio-fuels (food vs fuel debate) had a prime role to play. Agricultural commodities, used till now for food, feed and fiber now had to contend with this new demand source.

While the above demand factors are fairly well-known, the following “money-market” factors are relatively less broadcasted. The growing commodity based financial fund indexes added the “hype-fuel” to this price inflation. With growing investor base pumping in liquidity leading to speculative positions, the markets can be blamed for the short-term volatility in the price. Additionally, the slow depreciation of the US dollar till mid of 2008 against currencies of developing nations resulted in relatively cheaper food prices outside the dollar economy; thus fueling demand in the emerging economies. The growing demand was satiated by these economies by indulging in global bidding wars using the huge foreign exchange reserves they had accumulated. Naturally, prices had to rise.

“Okay, agreed that the above factors convey that the demand was genuinely there, but what was happening on the supply scene – didn’t supply respond appropriately to reign in the prices”, would the logical-mind ask. I fear not. The slower growth in arable land under cultivation as compared to population growth, the declining growth rate in crop yield and the climate changes due to global warming had put immense pressure on the Supply scene.

“But what about inventory – wouldn’t the stock-in-hand cushion the increased demand and supply pressure”, asked the skeptical-mind. Again, I fear not. The global demand has grown at a rate faster than the supply growth for close to a decade now resulting in an eroding inventory stock. As a result, inventory for wheat is estimated to be at its 60 year low, ditto for rice and for corn with inventory at a 40 year low and a 20 year low respectively.

Finally, how has the recession impacted the scene? Obviously the demand forces have eased to such an extent that world prices have taken a nose-dive from their peak in early-mid 2008: rice by 50%, wheat by 30% and milk by a huge 54%. The lower energy prices have also contributed by slashing the production cost (predictions released by EuroMonitor International Trend Watch is a good concise read). Will reduced demand lead to the much needed inventory build-up? I am afraid not unless investment in agricultural R&D is increased substantially to arrest & reverse the decline in crop yield. With arable land already at a premium, increasing farm productivity is a dire necessity else the supply forces are bound to hamper the next growth cycle!!

Posted by Amit Tambi at 05:49 AM | Permalink | Comments (0) | TrackBacks (0)

In one of my earlier blogs, I had drawn a hypothetical comparison between a power production process and a best-in-class supply chain. We saw how supply and demand situation can result in a stable equilibrium. A stable equilibrium is defined as an interplay of balancing forces where any deviation from normal, results in greater propensity for self-restoration.

In this blog, we will focus on certain key differences between these balancing forces in supply chain and in power production.

1. The Bullwhip Effect: A power grid is similar to a supply chain. There is a power factory that converts raw material like coal or a nuclear fuel or gravitational hydro energy into power in the grid. Distribution of power is much like a distribution in supply chain. Institutional consumers like railways or factories require bulk power unlike retail customers. A power distribution center has to constantly guage the requirement in terms of this loading mix and accordingly manage their transformers. In a supply chain, lack of collaboration could result in speculation  in terms of inventory hold in the nodes of the network resulting in wide fluctuations of stock levels as one moves downstream. Thankfully such a situation never happens in Power generation and distribution. By its very design, each and every node is interconnected. The upstream node proactively reacts to changing demand supply situation. If a downsteam node gets overheated in terms of demand, it could island that node to restore balance in rest of the network.

2. Inventory - a boon or a bane: Thankfully by its very design (or atleast so far), it is not possible to stock up energy. What flows into a node has to flow through or get consumed in some way instantly. Some of us though, specifically in developing countries, do use inverters for stocking and using energy due to unreliable power supply. The cost of doing this activity is exhorbitant due to the equipment yield factor. In the traditional supply chain though, inventory is essential. The fillrates, an essential KPI for supply chain, directly correlate with the inventory. Inventory consumes a sizable proportion of working capital and in some cases is subject to different kinds of market risks.

3. Cost Structure: In setting up a power supply chain, (read the networks), it is more about a fixed parameter of cost rather than a variable one. This results in a general long term view instead of sometimes a myopic view by a traditional supply chain. The costs are somewhat proportional to the flow-through volume in both cases though again variable parameters are predominant in the traditional supply chain.

All in all, these two seemingly different sectors have both differences and similarities.

The overall intent of these blogs was to understand challenges being seen by existing supply chains. From a modelling perspective, the power supply process is one of the interesting parallels that can be drawn. In not so unforeseen future, it is very likely that the supply chains would be akin to - a switching ON of a button inside a customer's dwelling that results in a virtual though automated procurement, production, distribution and delivery right at the doorstep - all in a flash just like power.

Posted by K. Srinivas at 08:06 AM | Permalink | Comments (0) | TrackBacks (0)

With recession fears forcing a cut-back on spending, there's greater competition for investment dollars among business functions, among departments that run those functions and the respective apps they run on. In such a scenario, it’s natural to think about putting in more money on customer-facing applications and functions like sales & marketing at the cost of back-end or less visible functions, which may all get clubbed together as support stuff.

We all know that SCM is critical and many a time, the lifeline to the company's existence, especially if you happen to be in Retail or Manufacturing. How do SCM practitioners fight for their cause in the boardrooms and in front of those who hold the purse strings?

Late January, I got a refreshing new way of looking at this conundrum from Erik Frederick, Vice President Information Systems Finance & Operations at Staples. Erik and team were visiting the Infosys campus to get to know us better. Since Supply Chain Execution is an area I take care of at Infosys , I got a good bit face time with the audience - Sterling Commerce was their primary area of interest, they have put in a lot of faith in the product's ability to manage both their B2B and B2C sides of the house (it’s a very unique company with a strikingly strong presence in both, a 60-40 split). The Distributed Order Management offering has been there for awhile at Staples, the company being an early adopter during the Yantra days itself.

So, what was it that I learnt from Erik that stayed with me long after we parted? It was a simple semantic twist in terms of his investment focus when he told me that the dollars are going to flow in 2009 into "customer-serving" apps - as he called them - as against "customer-facing" apps. When you think about it, that puts supply chain squarely in the investment column and suddenly brings with it inevitability that if your steering wheel needs to turn, your SCM wheels need to be oiled right as well.

If you stretch back into the chain of Plan-Buy-Move-Sell chain of trading companies (both B2B and B2C), how far can the "customer-serving" be stretched to? My guess is that it’s easier for sell-side supply chain (including TMS & WMS, which in any case stretch on both sides) to pull this off compared to the buy-side.  Out there at Staples, the core platform based on best-of-breed packages is well set, so it’ll surely be interesting to see how they crank up the “customer-facing” apps portfolio to the next level of efficiency, squeezing in more from the offered functionality within the existing landscape.

Posted by Gopikrishnan GR at 01:14 PM | Permalink | Comments (2) | TrackBacks (0)

A ‘hybrid instance strategy’ could help your warehouse consolidation initiatives when confronted with different levels of warehouse maturity. In this blog video, I have tried to articulate the key axes of assessing warehouse maturity (viz., business processes, IT systems and capital expenditure) and how warehouse management systems need to be architected keeping these in mind. The complete paper on this topic written by Girish, Satadal and me is available in the whitepapers section of infosys.com/supply-chain at http://www.infosys.com/supply-chain/white-papers/WMS-consolidation.pdf

Posted by Gopikrishnan GR at 04:32 AM | Permalink | Comments (0) | TrackBacks (0)

While Information Technology (IT) based sourcing solutions have revolutionized the way that organizations do Sourcing, it is also true that in the sourcing evolution of an organization, IT tools come second to the sourcing process they support. Many organizations make the mistake of hurrying onto the IT implementation bandwagon without giving a good hard look at the underlying sourcing process. More often than not, such implementations result in disillusionment for the stakeholders and blame for the solution vendor.

A food redistribution firm was evaluating number of leading functionality rich IT sourcing tools as the solution to a painfully long and unreliable sourcing process. Thankfully, before committing on a tool a process analysis using PERT-CPM technique was able to bring out that the problems lay in the gamut of complicated and unnecessary process activities. The IT tool would have done little to improve the sourcing efficiency unless the underlying process was sorted out. During further analysis of the sourcing process it emerged that two process components, which added a great deal of complexity to the process were in fact largely unrelated to Sourcing and of little value add. One component dealt more with Order Management than Sourcing and the other was in reality a data validation process for the non sourced items bought from suppliers.

I think that before taking the IT plunge, it is important for sourcing organizations to identify and formalize the key process components and purge the low value add ones.   Keeping the sourcing process honest and simple will help make the benefit versus cost equation look better for the IT solutions being considered.

Posted by Sameer Prashar at 10:09 PM | Permalink | Comments (0) | TrackBacks (0)

In a client meeting on Friday – the 13^th, I encountered a “scary” statement!! The category manager told me that his gut forecast was more accurate than the one generated by his ‘expensive forecasting system’ for last quarter or so. The symptom was recent and the forecast was going away by as much as 40%!!! Could this be symptom of a recession? How do I forecast during such times? Complex algorithms are far more powerful in finding out hidden patterns and extrapolates them beyond the capacity of human mind. Then why would such powerful models fail to detect a recession which is so obvious?

Forecasting systems have typically 12-36 months data. This works well in identifying patterns during regular times but not during recession. The demand falls dramatically during such times. Even before the system detects the dramatic drop in demand, probably a quarter or two has already passed!! The result is burgeoning inventories in the warehouse.

The key to forecast during recession is to detect it first. The first real indication comes when Forecasting systems miss three consecutive forecasts. During recession they continue to over forecast. The flip side of this rule is that if you forecast only once a month or a quarter, you still lose the plot! The only way to capture is to manually compare last 6 weeks forecast. During recession, demand for consumer products reduces dramatically. Mapping end consumer demand is the best indicator of slowdown. This means, for retailers, they need to look at their weekly sales of baskets and for Consumer Product companies – look at secondary or tertiary sales data, or syndicated sources for detecting the rate of slowdown.

The second step to this is to recalibrate the forecasting system. It could be done through variety of ways. One of the most effective ways to do it is to reduce the history window used in forecasting. Instead of 24 months, 3-6 months data would provide better picture. It is possible that some of the algorithms may not work with this little data. But then, if human mind can forecast better than the complex algorithms during recession, why not use simpler algorithms with less history – bootstrapping, weighted moving average, exponential smoothing etc. These algorithms are not as accurate as ARIMA, Regression or Nerual Networks, but performs better than them with a very short history. Typically, recession lasts anywhere between 6-8 quarters. These models should be deployed during such times. If the system is already using these algorithms, all the coefficients needs to be recalibrated every 2-3 weeks.

Most of the companies do forecast at a distribution center level and at a product level. During recession, customers become more price sensitive and are likely to switch the channels for buying the same product. Channel forecast becomes a balancing factor in manage inventory and satisfying consumer demand at a low cost. Distribution centers serve all channels and they are likely to experience different variability during recession. If the channel level forecast is brought into the picture, it will iron out inventory mismatch between distribution center and end consumer demand resulting into significant cost savings, higher fill rates and improved customer experience. After all, demand forecasting is all about improving customer experience, and there is no better time to do so, when everyone is going wrong in doing so… recession!!

Posted by Mitul Shah at 11:59 AM | Permalink | Comments (4) | TrackBacks (0)

Because we do. Is it that simple? No way.

I guess the answer to this question manifests when we take a close look at any SCM application environment and the landscape of the hardware and software technologies associated with it and the amount of effort required to integrate these applications.

For example: Let us consider the case of a major online retailer (similar to Amazon.com). Let us also assume, he wants to use ATG for order capture and Sterling as a background application for order management. Given the scenario (which BTW is one of the simpler scenarios in SCM domain), there is a host of solution design decisions to be made now; Choosing ATG and Sterling for order capture and management, database for both of these packages, and middleware to integrate these packages. Versions of each of these components will further induce certain restrictions that do not necessarily ease the problem at hand because each component is equally responsible to meet the overall SLA – response time (for UI), throughput (for batch mode). Throw in the infrastructure options to host each of the aforementioned components, hosting costs and HA and DR considerations, the problem gets transported to an all new tangent of heterogeneity.

At the crux of these options/complexities the online retailer just needs a product to showcase his inventory, capture orders, fulfil and manage the orders. The product should be highly available and disaster proof. It should scale to meet the growth in customers, vendors and inventory.

Wait a minute that is what SCM Cloud offers - “a set of services that provide SCM functions to any cloud user in an efficient, scalable, reliable and secure way”. That is, Cloud masks all the heterogeneities involved in implementing various SCM functions and the tiers within each function and provides a purely functional view rather than having to deal with the inherent technologies. The following illustration provides this functional view with users enrolling (based on the SLA) to different SCM functions rather than JDA-TMS or Sterling-DOM.  

This view of the cloud makes us, the service providers the best ones to take the cudgel to implement the CLOUD. We must therefore prepare a pool of requirements and a pool of plausible technologies and create a layer of abstraction to free the user from choosing packages, best-of-breed solutions, databases, integration middleware, and infrastructure and think only about the required functionality and how much he can/should pay for it. Here is a simplified tiered-illustration of SCM cloud components.

 

Of course the biggest of all challenges in realizing this cloud is security. How do we isolate one user (from one enterprise) using the cloud from another user (from another enterprise). Of course all tiers. All the way down to persisting data. We have the technology to device such a model. For example a security vault that based on the SLA and user credentials internally instantiates a virtual machine for order capture and links appropriate data sources.

Oops!! I am just getting ahead of myself. Aren’t I? You just have to wait for my next blog guys.

Posted by Guruprasad B. Nagaraja at 08:24 AM | Permalink | Comments (10) | TrackBacks (0)

Sales & Operations Planning (S&OP) is an integral component of an organization’s planning process that drives both revenue enhancement and cost control. Although it is not new to the industry, its deployment in the true sense varies, with only a very few organizations which have implemented this in practice to achieve full benefits. Companies usually face lots of challenges while S&OP is being deployed that can be bucketed under Process-Technology-Organization dimensions. Although we may follow any list that captures the critical Dos and Don’ts of a successful S&OP implementation, I feel the real challenges lie under the “Organization” bucket and need the top most priority since all the other challenges are directly or indirectly connected to one or more organizational issue/s.

The complexity increases with the nature, size and scale of the company’s operations that in turn involves various stakeholders and managing their expectations to a fair extent is extremely difficult. Each of the stakeholders with their teams brings their own agenda to the table which is not only target-focused but also ‘politically driven’. The head of the dominant function enjoys his/her position by molding or aligning the S&OP deployment based on his/her team’s interests. There are also operational issues that make things worse. For example, in reality, business users are supposed to follow a checklist of set of activities as per S&OP process guidelines. Due to paucity of time and lack of sufficient knowledge, they tend to look for a via media to complete these activities and compromise on the quality. One simple example to corroborate this point is as follows: Usually sales forecasting is a consensus process with a tight deadline that involves high participation from sales teams. Most of the times, sales folks don’t even contribute for a variety of reasons but the subsequent activities are carried out just to close the process in time and avoid any under-performance due to non adherence. Since such practices disseminate very quickly in the company, the ultimate impact is a sub-optimal realization of S&OP benefits.

There are no clear cut solutions to all these human related issues, but it is very important to be cognizant of them. We can provide a bit of structure to few of them by, say for example, defining the roles & responsibilities at various levels for each process, aligning performance targets to business objectives and involving top management for guidance & oversight. The best way could be to apply these structured solutions to a limited extent but maintain the habit of tackling such issues in a contextual & piecemeal approach based on one’s experiences and learning.

Posted by Aatish Goel at 08:15 AM | Permalink | Comments (0) | TrackBacks (0)

Recently I was part of design workshops to identify opportunities and define processes for a streamlined and enhanced experience of the customer while returning the merchandise in a multi channel scenario. The goal was to achieve a uniform, flexible return process which allowed the client to implement a “Buy anywhere, Return anywhere” returns policy. The review of current processes had shown gaps in process visibility for managers as well as customer, variations in experience and policies for different channels and the process being labeled as “tardy” by the customers. Key goals for discussion were to enable a system driven visibility of the return lifecycle to the customer, enabling an easier slap and post process for parcel able returns. We also had to ensure that as the direct & online grew as mainstream sales channels, the customer experience in returns process was also streamlined to have same level of personalization as an in store return with options for advance or pre paid exchange, calculate refund based on customer profile (loyalty), capability to create online home pick up schedules and easy process for e-labels for parcel items. The scope for improvement is tremendous as returns management process can be a very useful tool to build a competitive edge and customer loyalty.
While we are on the topic, as a recent development UPS and USPS have launched a new service “UPS Returns Flexible Access”, that would allow the customers of select retailers to place the parcel able items in their USPS mail boxes for pick-up. This certainly adds a new dimension to the return processes of major retailers as they look to address the issues and concerns of managing an efficient and customer friendly return/exchange experience.
The key pain points identified during our interactions also stand validated by the recent survey conducted by USPS, UPS and Forrester. A presentation on the findings is available online here.

Posted by Amarpal Sanghera at 05:20 AM | Permalink | Comments (0) | TrackBacks (0)

Well, continuing from my previous blog on Warehouse Costs and Margins, let's now touch upon the components that needs to be included in the contract between the 3PL Warehouse service provider and the Client who will be using the services of the warehouse.

The contract includes, at a broader level, the terms and conditions on usage, rate and billing contract, payment terms, warehouses contracted, billing period, space utilised, the client's customers and warehousing activities agreed upon.

In the billing contract, both storage based and activity based pricing are agreed upon. All activities that will be charged to the client will be listed with their individual rates. The method of charging will also be indicated, viz, weekly, monthly, quarterly or yearly. For storage based billing, the type of method will be agreed, whether fixed rental fee, pack UOM based or storage UOM based. This is decided based upon kind of items being stored, the kind of packaging, duration of storage and various UOMs in which the items may be stored. Fixed rental could be decided mostly when the similar kind of items having the same weight and dimenions, occupy almost a  fixed space each month or for a period. In case there is a wide variation in the packaging in terms of size and weight, the Pack UOM based pricing is preferred. However, if the item is stored directly in its UOM, rather than its packaging type, then Storage UOM is taken up.

Billing period can either be daily, weekly, fortnight, monthly, bi monthly, quarterly, half yearly  or annual.  However, activity billing and storage billing cycles are maintained separately. Also separate invoices for storage and activity can be created, based on the client's request.

The client should also include a list of his customers (who are basically suppliers) in the contract that will utilize the services of the 3PL warehouse. He will also have the option of having dedicated storage loactions reserved for each of his customers, which will roll up to reservations at the client's level. There can be an extra reservation fee that can be levied on top of the storage charges.However, the client can also opt for random storage of goods, wherein he would not have dedicated positions for each of his customers.

Posted by Lokmanya Rawat at 05:02 PM | Permalink | Comments (6) | TrackBacks (0)

Supplier Enablement (SE) continues to be one of the top priorities as well as a challenge for organization looking at transforming their procurement office and gain better visibility into their supplier relationship by increasing their spend under management. With the meltdown in Global economy, challenges are doubled but still the priorities overweigh these challenges.

SE is priority since it reduces overall procurement / Accounts Payable operationing cost and it also encompasses many different elements of Source to Pay processes -e-RFX and online auctions in Sourcing, Collaborative Contract life cycle management, punch-out capabilities in content management, collaborative procurement, collection of supplier data and finally transmission of procurement documents among buyers and suppliers.

SE is challenging because of technology requirements / adoption, investments and most importantly it requires collaboration across multiple organizations. Multiply these challenges with globalization, disruption in supply chain dynamics driven by supplier / buyer expectation, business models, system and processes and also economy meltdown. With continuous evolution of the procurement technology landscape, organizations aim to innovate in their procurement business, operations and technologies and can at times embark on a strategic shift, moving away from niche players as part of enterprise application consolidation. Caught in the middle of the change - With these market realities, supplier enablement, considered to be a bull of cost saving, becomes bearish in nature if technology utilization is based on the platform. For example, an organization using the Ariba application typically utilizes Ariba Supplier Network for supplier enablement and an organizational decision to move away from Ariba can make the established enablement framework obsolete, thereby propelling the entire community to undergo a painstaking and costly transition process, which might turn out to be unfruitful in due course of time because of high costs incurred resulting in low cost to benefit ratios, thereby ultimately affecting the bottom line.

Can organization dampen disruption in the supplier eco system by de-coupling supplier enablement from procurement execution? I strongly feel it is achievable and this will be the way forward. By doing so, organization can enhance efficiency in supplier enablement by confining ripples caused due to changes from innovation in the procurement business and operations, and a shift in technology, thereby transforming supplier enablement to a shared service oriented architecture, which would make the process of switching to newer technology or a newer platform a lot less painstaking, also helping maintain the integrity of the system as a whole.

Posted by Raj Rajendran at 02:54 AM | Permalink | Comments (0) | TrackBacks (0)

The global economy is changing. That's arguably the only thing that can be stated as fact about this change. The only other thing that could be stated as fact is the continuous need for corporations to make profits, serve customers and to provide value to shareholders. This is true for 3PL providers and their customers too. So, what do 3PLs do to be prepared for the coming change? What are the IT hooks they hang their business coats on?

I will be sharing my experience with the facets of 3PL IT force multipliers on 24th Feb 2009. Please register here to be a part of the webinar.

 

 

The business' urge to move up the value chain is a lofty goal, but difficult to act on. It is so, because, of two challenges: 

1. How to move up the value chain?

2. How to measure the value?

For a 3PL, (1) usually implies moving from being a tactical "space and hands" operation to a strategic "two companies with one mind" relationship with their customer. This requires organizational commitment and execution excellence, with information management being key to execution excellence.

Resolving (2) is even more difficult. Moving around the value chain is pointless, unless it can be measured, shared and proven. A 3PL requires the infrastructure that will help extract value for itself from the value it derives for its customers.

While all this requires organizational focus, good IT solutions can make a fundamental difference to a 3PL's ability to differentiate and to gain from its differentiation.

 

 

Posted by Chandradeep Bandyopadhyay at 03:08 AM | Permalink | Comments (0) | TrackBacks (0)

I was recently part of a set of workshops to identify improvements for a certain client's store experience. The key considerations where generic in nature; enhance the customer store experience, enhance the employee store experience with positive impacts on the company's bottomline.

As part of the discussions we talked about sell through based fulfillment optimization for direct to customer orders. The question that cropped up is whether sell through optimization can be applied uniformly across stores, and whether DCs should be considered at par. Can we just apply the classical sell-through formula or do we bias it?

A simple way of looking at sell-through is to consider it the rate of stock reduction. For the purposes of this discussion lets assume the metric is monthly and the formula is stock sold / stock on hand at the start of the period. Lets also assume that the inventory is seasonal in nature (say fashion) and the stock on hand will not be replenished.

	Month 1	Month 2	Month 3
Sales	500	250	125
Start Inventory	1000	500	250
Sell-Through	50%	50%	50%

 Here, while the sell through remains the same, the actual absolute sales are reducing. On the other hand, if one takes a cumulative view, and then averages out for the period the real rate of reduction comes through. The formula is Cumulative stock sold / (stock on hand * no of months considered for the cumulative period)

In the case, the sell-through percentages are:

	Month 1	Month 2	Month 3
Sales	500	750	875
Start Inventory	1000	1000	1000
Sell-Through	50%	37.5%	29.1%

This now gives a more accurate representation of the actual slow-down in sales!

So, what are the cons of a cumulative weighted sell through for seasonal non-replenished stock?

Posted by Chandradeep Bandyopadhyay at 05:24 AM | Permalink | Comments (0) | TrackBacks (0)