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February 27, 2010

Technical Architecture and the silos thereof....

I was recently sitting in a café a flipping through a magazine on Green Architecture for Retailers. It included the entire gamut of retailers - apparel vendors through grocery vendors and how they wanted their stores to be green; Emphasis on green paints, green lights, recyclable paper towels and so on; the investments and the returns thereof; testimonials that justified the idea, the ones that stressed on the longevity of these implementations and those that cautioned the reader.

 

I constantly kept imagining the role of the architect that evaluated a retailer space and proposed the ideas that could be effective. The ideas that would make the environment more smart, more reactive and therefore more effective and worthwhile. 

I have too predicted and emphasized such smart and agile options here and here for Supplychain implementations. But in this article I want to stress on the silos we the (Technical) Architects face. With the landscape architects we have the entire store being assessed and evaluated for improvements. Then they go back to their drawing boards and create a plan that works best. Upon winning the proposal they have a host of teams to support their ideas – carpenters, plumbers, upholsterers, construction workers, electricians and so forth.


So why am I so worried about a field that doesn’t concern IT? Well, I do have a point.
Today with the ‘advent’ as I like to call it, of the technologies like virtualization, grid, cloud etc, there needs to be a bit of direction to the way we use it. It involves the client who is paying for it, the service providers executing the NFR and recommending the changes, and host of team to back that up.


I have been with multiple clients across the globe and I don’t think any of them are exploiting these technologies to the maximum. Some places the resources are appropriated on an application by application basis like in the 18th century. One may argue this is fine as long as there is a roadmap for server consolidation. But that is not the case.


At other locations I find huge farms for each tier – hundreds of 64 bit p6 servers for databases for all the applications in the enterprises’ landscape being underutilized. But then the question is if we can expand these farms anytime why procure it so early.


In my opinion it is because of isolated IT roadmaps. DBAs are consolidating the database servers while the AIX team has their own version of adopting and adapting to virtualization. Storage team doesn’t know about the DBAs or the AIX team and they have their own version of SAN improvements. Lastly it is the pitiful you working as a technical architect trying to establish an architecture for the OMS application at the heart of the enterprise’s application landscape. Any technical architecture deliverable without proper assessment of the infrastructure etiquettes at the client site will therefore be irrelevant at best. (For example, you may write section on HA and DR for the application that will be deployed on a farm that already has HA-DR plan. You may suggest RAID 10 while the standard at the client site is to use RAID 5).


So how do we get around these silos of teams? Well, you can’t. Now, that won’t work will it?


I think although this has to be dealt-with on a case-by-case basis, I can’t stress enough how important it is for a technical architect to spend a couple of weeks to understand the dynamics at the client site before dwelling deep into gathering the application specific NFR. Once the landscape is evaluated, the silos wont be silos anymore and it becomes easy to propose a technical architecture for an OMS implementation. The architects will be talking in terms that the DBA's, Unix Admins, SAN teams, EAI teams can all understand and relate to.

I will perhaps write another blog describing the PRE-NFR steps. Stay tuned.

February 26, 2010

Augmented Reality and Multi Channel Retail- Unifying the Customer Touchpoints

Most retailers have three primary channels: stores, catalog, and online. A catalog offers a great selection of products in a medium that customers are comfortable with and providing service through a contact center allows ample opportunity for cross-sells and up-sells. The online channel has even greater selection plus integration with social networks, user reviews, easy comparison shopping with other retailers and the convenience of shopping at convenience. The traditional brick and mortar stores let the customers handle and play with products, return items in person, carry them home with you that day and talk with a salesperson if they have questions. The advent of Mobile commerce and growth of the convergence phenomena across the digital world through 'augmented reality' and 'ubiquitous connectivity' has led to unique opportunities for retailers to leverage in developing another channel for commerce as well as enhance the capabilities of existing channels.

 

Many blogs and articles have shared the consumer benefits from convergence as well as augmented reality. 'Augmented reality' technology has the potential to transform the customer experience in fundamental ways that separate the leaders from the laggards in retail. I wanted to step back and look at the possibilities of how 'augmented reality' view of the customer can enhance the effectiveness of operations of retailer's channels. Retailers already build a 1.0 version of  'augmented reality' of the customer by tracking all of a customer's purchases in multiple channels through rewards programs or true central transaction database. Recent addition of the wish lists and 'shop with friends' capabilities allow retailers to understand what customers are interested in, but not buying. However these databases will soon be as obsolete as rolodexes on sales person's desk. Contacts, mailing lists will no longer generate business in any channel. Relationship based selling will soon be entering the consumer retail like B2B sales and social networks are a big part of the change. This is the new shift  from 'I Know' to 'I know, Right Here, Right now'. "Rich Information Visualization" is Gartner defined as Technology Trigger in Gartner Hype Cycle for CRM Customer Service and Field Service, 2009 is a key trend that will shape how Retail works- with the customer as well as within it's sales channels.

 

'Augmented Reality' in terms of enhanced awareness of location, content and relevance of the interactions with customer as well as the operational effectiveness of the channels through layering of the information will be the immediate uses retail industry can adopt. Augmented reality could affect everything in the retail value chain: marketing, merchandising, selling and even the way employees work and communicate with one another. What essentially is information flowing seamlessly from a unified view, would enable multiple touch points across the supply chain with enhanced information and anticipated behavior of the customer. Does this mean overlapping of CRM function into SCM? Leaving asides semantics that certainly seems the future where the 'right here and now' access to the customer interactions across the channels would be a required capability across various points in the supply chain and not an interim data management capability like CRM or BI. The cornerstone to enhancing supply chain effectiveness from the massive amount of information expected from the high number of 'interactions' with the customer is creating unified view of each customer from snapshots of their 'interactions' across sales channels. These could range from actual purchases, wish lists, social network extract and to search phrases etc.

 

The key point to consider is that as retailers continue to strive towards the holy grail of a true multichannel operation or integration end state, new developments like 'augmented reality' and 'ubiquitous commerce' will add to the complexity and challenge of keeping up with the consumer technology curve. In my future vision of retail, I see the transactions, behavior and expectations of the customer across all channels get enmeshed into a unified view of the customer allowing the retailer to orchestrate its operations and supply chains for various channels to deliver the optimal 'augmented' experience.

February 23, 2010

The Imperative for Retailers to Assess Multi-Channel Operations Capabilities as a Prelude to Multi-Channel Commerce

The 2009 holiday buying season in the U.S. and indeed worldwide, presented two important learnings for the retail industry.  First, more consumers turned to online channels to perform price and feature comparisons as well as to execute their purchases.  Online channels were reported as being up 4-5% through mid-December of 2009.  One of the most significant takeaways from this year’s National Retail Federation (NRF) conference was that cost and value conscious consumers have discovered that online shopping and integrated merchandising are becoming a far more attractive option, and these same consumers demand more of these experiences.  The ability to research products, place orders online, pick-up or return purchases at the nearest local retail outlet have captured enormous interest, and consumers demand that these experiences occur without a glitch.

The second learning was that retailers stand to gain more profitability in practicing smart, lean inventory management strategies.  The notion of stocking and promoting just high-demand items, while exercising supplier contracts for quick turnaround drop ship or order fulfillment worked well for those retailers able to pull-off such strategies. Indeed, the results of such strategies are being reflected in added profitability for these retailers. In its 2010 Predictions for Retail Industry, IDC Retail Insights noted that the new winners in retail will be those who can cater to more informed customers, with immersed experiences, integrated merchandising, and instrumental execution.

The reality of immersed experiences and instrumental execution is really about discussions related to Multi-Channel Fulfillment Operations (MCO) or Multi-Channel Commerce (MCC).  The two terms are often confusing, haven’t different meanings for functional retail teams.  In his blog posting, Decide where you integrate: MCO does not equal MCC,Gopikrishnan GR (Gopi) makes a rather cogent argument that retailers need to separate the two meanings, and focus on one building to the other.  MCC is indeed more about B2C commerce strategies related to the customer shopping experience via the web, including personalization, content and shopping cart experiences.  MCO in my view, is really about the capabilities of the retail supply chain to be able to integrate multi-channel sales and inventory fulfillment.   The imperative for retailers is to spend more time and consideration toward implementing a phased MCO strategy, one that meets the specific needs of the retail segment.

The new realities of MCO are fostering the ability of consumers to shop and place an order online or through a mobile channel, have real-time response to global inventory availability, reserve inventory, and have all order information visible to all pertinent partners in the supply chain. As Gopi rightfully points out, this is easier said than done.  In fact, many global manufacturers have struggled and spent considerable resources in implementing many similar type capabilities.  The notion of “walk first and run quickly after” have relevance, and multi-year strategy can be very common.

In my view, retailers need to take two very broad perspectives in addressing an overall MCO strategy.  The first should be the retail supply chain infrastructure and fulfillment processes that are required to effectively manage multiple-channel fulfillment.  Processes should include a comprehensive analysis of the total supply chain network, with a eye toward agility vs. latency.  Think of the means for streamlining inventory cross-docking or supplier drop-ship programs. Supplier sourcing and collaboration programs directed at rapid replenishment will be a rather important consideration. And if your retail operations include private labeling of products, network connections and information integration with contracted manufacturers are also critical considerations.  As noted earlier, optimized inventory deployment, predicated on demand intelligence, is very essential.

After process comes the technology that can best enable specific needs of MCO. The reality of this post-recessionary climate is that technology investments may have to be funded by incremental or ongoing savings in supply chain operations.  The good news for retailers is that there is much learning that can be harvested.  Order fulfillment technology providers who have demonstrated implementation experience have best practices that can be leveraged.  Multi-echelon inventory management software providers also have demonstrated the ability to help retailers implement smarter and more efficient inventory stocking and deployment strategies.  More options exist for technology deployment, including third-party or SaaS platforms. Finally, specialized consultants and system integrators with proven retail industry experience understand the nuances of how to walk before you run, and test before you go-live. 

If you take one nugget from this posting, it should be that a seamless customer experience starts and ends with seamless supply chain capabilities.  While the task is complex, the rewards are the ability to be a leader in multi-channel commerce and fulfillment capabilities for customers.

Bob Ferrari

About the author: Bob Ferrari is the creator and Executive Editor of the Supply Chain Matters Internet blog.

February 15, 2010

Retail Customer Order Management Blog Series: Part 2 – The Retail Order

My last blog finished with Joe Shmoe finding out that despite all his research and time spent deciding on which TV to buy, the store is out of stock for that particular model. The retailer is now in the unenviable position of losing the sale despite having invested a lot of resources in advising the customer and facilitating his Find, Decide and Buy decision. 

The ultimate objective of the retailer is to provide an environment and processes which facilitate the customer in buying products they want i.e. convert the need or intent to buy into a sale. Product availability is one of the key drivers for making this happen. However the supply chain mantra of keeping it 'lean and mean' implies that ensuring product availability is always a balancing act where the retailer juggles with the conflicting principles of lowering inventory carrying costs while preventing loss of sales due to unavailability of stock.

In such circumstances many retailers are looking to leverage their inventory as efficiently as possible. As the traditional brick and mortar retailers have experimented with the online model, they are using the learning’s from that process to improve their traditional store selling models. They have realized that in case of stock out situations in the store, if they can reassure the customer that the product would be delivered to them in a timely and low cost manner, they would most likely not lose the sale.
 
This then leads to the retailers attempting to offer different means of fulfillment from within the store. This started with merchandise locate systems which helped a sales associate determine if a certain product was available in the backroom or another store in the neighborhood. They could then pull the product from the back room or ask the customers to drive to the nearby store and pickup the item. With improving systems and visibility to available inventory, this feature was enhanced to lookup availability in warehouses and shipping/delivering the product from the warehouse to the customer.
 
With the explosion of choice in product categories such as books, movies, music etc, the online concept of 'endless aisles' became very relevant. Now the retailers wanted to offer the same variety and choice in a store environment without holding large amounts of stock which it would otherwise entail. The first stage of implementing this in the stores was based on pragmatic decisions of costs - since the online channel already had the mechanisms in place to manage these endless aisles, why not bring the web into the store and so emerged the 'kiosk'. This started off with basic desktops and later standalone kiosks in the stores which allowed the customer to browse the retailer's website and get products delivered to their homes through UPS or FedEx.
 
This simplistic model of bringing the website into the store obviously has its disadvantages in today’s highly competitive retail environment. More profitable product categories such as furniture, large electronics and appliances cannot be kept in large quantities in the store and also cannot just be shipped using UPS. They not only require specialized delivery but also installations and setup.
 
Retailers are also looking for high margin revenue streams from the selling of services. There is an increased emphasis on selling a complete package or project which includes consulting services, installation & setup, maintenance services in addition to the delivery of products. These services require different operational models which involve scheduling appointments and then executing on them through service & capacity management, in home payment options etc.
 
Also as retailers target small and medium sized businesses, the interaction model required does not match that for traditional B2B or B2C customers. It lies somewhere in between where a small business owner may go into the store and buy 10 laptops and an annual maintenance plan. He wants to be treated like a business with special pricing and benefits but cannot justify the retailer dedicating a separate channel and disproportionate resources for his volume of business.
 
This convergence of new opportunities within the store environment is really challenging the traditional store systems. As these opportunities and challenges have emerged at different points in time, they have led to a multitude of stop gap processes and systems which provide a fractured & often time broken customer experience.
 
One of the major reasons the stores organization is still struggling with it is the inherent lack of understanding of the differences between their core cash and carry fulfillment model and the order based fulfillment model. The cash and carry model is based on the here and now - pay for the product and walk away with it.  This has and will remain very successful for a large part of the stores core business but it also leads to an inherent bias. Every interaction with the customer is looked at from a transaction by transaction basis and the life of each transaction is very short ranging from a few minutes to a few hours. On the other hand, an order is a promise of services performed which ranges from days to weeks or even months. Look at each of the scenarios described above. All of them involve a promise which is not fulfilled immediately but extends over a period of time.
 
The question which arises now is - how does viewing a customer interaction as an order vs. a transaction help the retailer provide a better customer experience? The order as a construct has been around for many years especially in the online and catalog businesses. An order has a well defined lifecycle from its creation to its fulfillment. One customer order can enable the shipment of multiple products at different points in time from different partners which include warehouses, vendors, stores and wholesalers. An order can be the single source of truth about fulfillment statuses for both the customer and the retailer. An order can handle fulfillment of services which require scheduling and capacity handling. An order has an inherent work flow which helps orchestrate and stream line the very complex tasks required over an extended period of time to satisfy a highly discerning customer. 

At this point somebody may justifiably ask as to why the stores organization has not embraced this concept wholeheartedly? The answer lies in my earlier assertion that stores have a 'here and now' mindset and when you try to force fit an order into that mindset, you find many challenges.  My attempt in the next few blogs would be to identify some of these challenges, demystify them and provide suggestions on how these can be addressed. Managing the life cycle of a store or retail order is what I refer to as retail customer order management.

February 14, 2010

Y2010 & Ahead – value chain trends in emerging economy – Part 2 (Technology Trends)

In the prior blog on this topic, I had described a few value chain trends for Y2010 and beyond. In this blog, I will outline a few technology trends linked to these value chain trends.

1. Customer side equations will take prominence over rest of value chain:  Based on my interactions with my customers (especially in the manufacturing industry sector), I see more and new IT projects getting initiated to a) implement / upgrade / enhance sales / lead management systems – online sales with intelligent lead management engines – Unica, Epiphany, SFDC, Eloqua etc., increased focus on CPQ (configure, price, quote) tools / packages – Sterling, SFDC b) implement / upgrade /enhance customer service / case management systems – SFDC, Clarify (Amdocs), MS Dynamics c) increase in spend on Customer acquisition and retention analytics – this is going beyond the traditional customer service agent dashboards / report cards to now developing complete customer insight portals (have heard these initiatives being actually called Customer 360 degree). Another area catching up fast is the number of initiatives integrating existing CRM systems with social media – Facebook, Twitter, MySpace etc to gain rapid and comprehensive insights into customer buying patterns and feedback as well as announcing new product introduction to customers directly. Product vendors such as SFDC seem to be taking this to the next level with introduction of platforms such as Chatter – to drive growth both intra and outside customer collaboration.

2. Supply Chains will get more integrated with marketing and service chains:  Looking at spend on type of new IT initiatives on supply chain my clients are making, I observe the following trends on the technology side: a) minimal / incremental spend in traditional supply chain planning tools / projects. In most cases the planning tools are already in place with more of ERPII planning tools (SAP APO, Oracle Demantra) taking over the erstwhile best of the breed packages. The focus on supply chain planning now is shifting more towards in engaging marketing & sales channels in developing demand & supply consensus b) increased spend on improving user experience and enable faster decision making -  bundling of business intelligence dashboards with supply chain metrics, real time customer / market feedback, competitive analysis is evident from all the key technology players including SAP, Oracle focusing clearly on portals and metric dashboards with deep drill down capabilities. Microsoft is making big inroads into this space through advanced on the fly analytics through new MOSS offerings with bundled SQL Server and Performance point services c) boundaries between planning & execution is blurring fast – planning engines (SAP APO, Oracle ASCP) today are more interconnected with the execution world with more focus on quick regeneration of supply plans – allocations and deployment based on frequent planning runs (daily / hourly in some cases) d) need for real time visibility is on the rise -  this is evident by almost all the supply chain players offering event dashboards with a basket of pre-configured KPIs, alerts and notification features for various supply chain disruptions – supply shortage, forecast over / under, order fill rate disruptions etc e) supply chain planning & execution for aftermarket / reverse logistics seems to be picking up – while in most cases these are still managed by legacy systems, a number of vendors are entering into this area fast (e.g. Sterling which offers robust multi-partner reverse logistics partner chain and returns management features).

3. Speed and responsiveness will be key drivers for spend on new initiatives: As described above, IT spend on new initiatives seems to be focusing on developing capabilities to sense and respond quickly to the customer trends and propagate the signals in almost real time to the last link of the back end supplier chain. A few technology trends on the rise to support this phenomenon include a) the sheer proliferation of  visibility mechanisms in almost every new release from ERP (Oracle emphasized during Openworld 2009 on the new advanced collaboration feature enabled by the new fusion stack) as well as best of breed vendors – portals, dashboards, pre-configured KPIs and collaboration spaces b) integration of social media into the app space e.g. SFDC’s chatter, increasing number of enterprise pages on Facebook and Twitter and c) increasing focus on MDM projects – especially customer data. Market place is also getting re-organized quickly on this front fast (recent acquisition of Siperian by Informatica is clearly a signal that MDM will play an integral role in enabling real time analytics and business intelligence) d) increasing number of supplier collaboration automation projects – to cover even smaller / tier 2 suppliers who cannot afford costlier EDI solutions (SAP SNC seems to be catching up. Microsoft is also pushing the MOSS and Unified communications offering as another alternative). Another supporting trend which is not yet on the forefront but gradually catching on is the advancement of technologies like CEP (Complex Event Processing) and BAM along with rise in BPM adoption in the manufacturing sector. While BAM has been in play for some time, significant no of my clients are investigating leveraging CEP and BAM in driving faster and real time decision making in areas such as supply chain and customer service functions.

4. Cost will continue to play critical role in decision making:  Cost prudence set in during 2009 is there to stay on and is a stated driver for almost every new IT initiative. A few trends highlighting continued focus on cost leadership include a) increasing number of requests for complete turnkey IT solutions – including infrastructure, hosting, ongoing support & maintenance – more and more clients are willing to move away from on-premise implementation model b) increase in adoption of SaaS models – players such as SFDC seem to be making significant inroads into this market with Force.com platform and also providing AppExchange as a means to fill in whitespaces in offerings by leveraging solutions from partners (however the skepticism around data security & privacy are still prevalent). Even established on-premise vendors have either taken a step towards providing SaaS / On-Demand (Oracle, IBM, Sterling) or are contemplating moving into SaaS c) adoption of BPM and BRMS (business Rules Management System – Pega, Lombardi, Savvion) is on the rise – BPM(S)  is increasingly seen as helping in breaking the silos in multi-divisional / LOB structure and standardizing / automating processes and reduce duplication and management overheads d) rise in number of short term initiatives with well defined ROI. Even large initiatives are being chunked up into several smaller ones with average initiatives spanning 2-3 months at max. 

5. Asset Management will gain more prominence and will help in accelerating “green” initiatives: As observed in my blog on Gartner’s ITAM summit in Nov 2009, the focus on Asset management is on the rise, thanks to advancements in features provided by leading tools such as Maximo (part of IBM Tivoli suite) which offer not only robust EAM (Enterprise Asset Management) functionality but also comprehensive IT asset management capabilities (inventory, remote monitoring / control, commissioning, decommissioning etc). Virtualizations seems to be on the rise in almost every enterprise now and so are “sustainability” & “green dashboards”.

Overall I am very excited by these new emerging trends as these provide significant opportunities to offer focused solutions and services to enable and support these needs through my portfolio of products & services. 

What are your thoughts and comments?

February 11, 2010

Y2010 & Ahead – value chain trends in emerging economy – Part 1

It takes a crisis to bring out the best of our innovation and constructive potential. A crisis helps us focus on finding and doing the right things and breaking the barriers and maintaining status quo.  This has been a common theme for most of my clients who I have been associated with in Y2009. As the economic recovery seems to be taking roots, I anticipate the following trends to strengthen especially in the manufacturing sector, as we look at Y2010 and beyond.

1. Customer side equations will take prominence over rest of value chain: This is one of the key shifts I have observed to be happening across the cross-section of the clients I have worked with in 2009. The customer focus seems to have taken a fundamental shift and I observe that organizations today are not just focusing only on standard pre-sales (SFA – lead generation, lead capture, lead qualification and conversion) and post-sales case management activities, but are also looking to find deeper insights into customer behavior, segmentation and develop deeper relationships. Customer service function, which traditionally used to be a peripheral function, is becoming more central (most of my customers are increasing spend in augmenting customer service capabilities and integrating customer service with backend functions) to organizations as part of the new customer acquisition and retention strategy.  

2. Supply Chains will get more integrated with marketing and service chains: While supply chains will continue to become more organized and get more attention in the new ecosystem, my opinion is that the supply chain function itself in undergoing a fundamental shift and the boundaries between traditional planning and execution functions is almost becoming non-existent. Demand Planning has come a long way from just being statistical forecast driven numbers to consensus & collaboration based forecast to now also include market intelligence, competitor analysis and getting directly plugged into the upstream CRM function – lead generation and lead qualification. Similarly supply planning is no longer a batch oriented process where plan which gets created first, then shared and then modified and re-planned. Supply signals today are more received, processed in real time and corresponding supply decisions – new order, supply transfers / deployments happen much more frequently in some cases on hour- to-hour basis. Today the focus is more on improving the execution efficiencies and strengthening the visibility through better and real time connections with suppliers, channel and distribution partners and customers.  There are clear signs of convergence of supply chains with the marketing & sales whether it’s forecast consensus or collaboration or determining the shipment plans from manufacturers to retailers (the shipment based on historical patterns are being replaced more by weekly store / shelf plans based on sell-through as well as marketing calendars). Similarly the post-sale customer service integration with supply chain function is also tightening – whether it pertains to quick replacement of a service part or cutting lead time on repair of a defective part. Some of my clients are clearly investing in these areas and focusing on improving service capabilities by restructuring supply chain function to strengthen in reverse logistics and post sale customer service operations.

3. Speed and responsiveness will be key drivers for spend on new initiatives: As the economic recovery sets in, I see clients focusing on improving the capability to sense and respond to the new growth opportunities and make investments in every area of value chain to enable speed and responsiveness. This includes augmenting lead management capabilities to also drive rapid growth through channel partners, to rapid product introduction leveraging design partners, to ensuring supply coverage of critical commodities, to enhancing capabilities to provide more customized offerings based on modular configuration, pricing and quoting ,to tighter and effective allocations management, smaller and frequent replenishment loads through distribution partners, enhancing customer service and leverage social media to control returns, recalls as well as find new opportunities to increase cross-sell and up-sell through customer service centers.
While I find the above trend to be shaping up in almost all sub-sectors of manufacturing, it’s especially more visible in the high-tech and consumer electronics sectors where rapid product introduction every 3-4 months means there is only one chance to plan & execute the entire plan including inventory levels, allocations,  supplier / manufacturing orders. The “plan driven execution” strategy is giving way to “execution driven re-plan”. As Dan Gilmore of SC Digest describes this as “shortening of gross margin” cycle, the need for improving speed and responsiveness is no longer a differentiator but a necessity in today’s extremely competitive environment.

4. Cost will continue to play critical role in decision making: While the recovery is onset, focus on keeping costs low will not only continue but will take on new levels including looking for complete outsourced model for not only peripheral functions (payroll, accounting etc), but also for mainstream functions such as supply chain planning, customer service & support. Another key trend is sharpening focus on breaking the silos in multi-divisional / LOB structure and standardizing / automating processes and reduce duplication and management overheads. On-demand / pay-as-you-go barriers are seems to be getting lowered, however the skepticism around data security & privacy are still prevalent. Another dimension of cost prudence is reflected in the cost of (non-)compliance and maintaining reliable business partners (increase in supplier risk in the downturn has made most of the organizations re-look at their sourcing strategy and evaluate supplier viability for continued business). I have also observed another shift in most of my clients in terms of signing up for new initiatives. Most of these are short term initiatives with well defined ROI. Even large initiatives are being chunked up into several smaller ones with deployment not exceeding more than 8-9 months at a time (the average initiatives these days are now 2-3 months at max). 

5. Asset Management will gain more prominence and will help in accelerating “green” initiatives: Asset management which has traditionally been more dormant or passive function seems to be gaining traction with more and more organizations focusing on leveraging assets (plant, fleet, machinery, buildings, office equipment) to not only support the ongoing operations, but also to change the mix to incorporate more “green” and reduced carbon footprint. The US federal initiatives and incentives on Smart-grid is already generating significant momentum from the industry bellwethers such as HP, GE and IBM. Quite a few of my clients are making investments in new projects ranging from understanding the existing carbon footprint to determine what / how they should invest in new assets and / or leverage the new assets to meet their new “green” goals. The journey in this direction has just started!

In the next part of this blog I will share some insights on technology / IT trends linked to the above themes.
As always, will be curious to know your thoughts and comments!


February 7, 2010

Et Tu Toyota …

Reading about the Toyota Accelerator Pedal recall (around 2.3 million vehicles to quote a figure), one can’t help but wonder how a company with its squeaky clean quality and safety reputation, a temple of learning for supplier collaboration processes, could falter on such a grand scale.

The accelerator pedal in question is sourced by Toyota from two suppliers, Denso in Japan and CTS in Indiana US, with the recalled parts coming from CTS only. Now CTS is not an exclusive Toyota supplier, it also supplies similar parts to other automakers as well. But the only ones that face issues are the Toyota pedals.

Till the late 1990s, Toyota used to practice a risky strategy of having just one supplier for a part, leaving it vulnerable to production disruption. After a fire in one of the critical supplier plants shut down production for 5 days, Toyota started having multiple suppliers for same parts. Toyota as a company is considered a benchmark in the supply chain world when it comes to supplier collaboration and parts standardization, but somewhere in pursuit of risk mitigation and cost reduction in recessionary times, it did not standardize the designs for accelerator pedals across its suppliers. It seems that designs for the pedals manufactured by Denso and CTS are different. 

Which begs the question:  Is Toyota wrong to have two different suppliers and two different designs? Well, there is nothing wrong in having two suppliers, but for an automobile company that consciously tries to carry minimal inventory, having varying designs across suppliers is inherently dangerous. It kind of defeats the purpose of having multiple suppliers to mitigate supply risk. If one supplier goes down, the other may not be able to ramp up production with an exact substitute. Not having standardization also increases the complexity and oversight required for quality control, which may have also led to the current situation.

It will take Toyota some time to come out of the situation that it finds itself in (sales are down 16% in January 2010 and the recalls will cost almost $2 billion) but hopefully it will get back to its “Toyota Way(s)” pretty soon.

February 2, 2010

My sale wants to grow up and become an order

I currently consult across multiple clients. They all are retailers, in different segments. At one retailer, we are defining a roadmap for a order management solution. In the course of our discussions, a question keeps getting raised about the sale made in the store: Is that an order?

You walk into my store, you pick something up, want to buy it, take it to the register, pay for it and take it home. In this entire transaction, you interacted with my company. You took something out of my inventory and paid me cash. In retail lexicon, this would be called a sale. However, if you were a business, and sent me a purchase order, and I responded by creating a sales order and then shipped it to you and invoiced you, the sales order is what would be called a order.

So, a customer transaction in store is a sale, and a B2B transaction is obviously an order. What about an e-commerce B2C transaction? Other than the fact that the customer's ship to address, payment information, and bill to address is available with me, how is this different from a sale? Should I encourage my sale to grow up and become an order?

I think the difference lies in how B2C transactions have led to evolution of the customer relationship. Prior to dot com and online stores, the businesses were my "big" customers. I had relationship managers and account managers for the businesses I dealt with. As far as the store walk-in customer is concerned, I was nice to them when they walked in and I encouraged my sales persons to build relationships but it was impossible to focus on each customer relationship as if it was a business we were dealing with; it just won't scale. You never knew if all the relationship building was "worth it".

As the B2C model has evolved, order management systems have evolved to enable companies to electronically pursue each individual customer. If you register on my website, I will remember your preferences, show you products that you may like, show you other products that people with similar purchase histories have bought. I will follow up after a purchase, ask you to write a review, ask you to rate your experience. I will send you emails on newer products, will send you a birthday e-coupon, I will have a relationship with you. The online OMS/e-bot/site-'thingie' is the personal relationship manager (and for a lot of people, maybe their best online friend :) - they are a facebook friend, twitter follower!). This aspect is what I think makes it very interesting for the stores.

If my POS system could register the customer and treat each retail sale as a B2C order, I can unleash my entire relationship suite and try to build a connection with every foot fall. This may not lead to a long term relationship for every customer, however my actual cost per transaction is just my system whirring away. Storing the retail sale as an order against the customer is key to success since every aspect of the customer's interaction needs to be visible to my virtual e-relationship manager.

What are the questions and challenges this throws up?

Post publish edit: 5 seconds after I published this I notice this very interesting entry by Guneet on this blog on nearly the very same topic :)

February 1, 2010

Retail Customer Order Management Blog Series: Part 1 - An Introduction

This blog got triggered by a series of events that I experienced recently. We were asked recently to analyze a 'simple' retail and online integration for enabling the order management and fulfillment process for kiosk orders which were placed and paid for in the store. Lack of existing documentation forced us to go to the store multiple times to place 'test' orders for elaborating the various scenarios. Some of our experiences have been documented in a previous blog by my colleague Sameer.
 
This actual 'cross channel' experience combined with a similar large implementation for an earlier client convinced me that I should spend some time providing an introduction to Retail Customer Order Management and its specific nuances and challenges. My focus is not to describe the traditional order management process typically associated with a single channel i.e. the steps required for managing the lifecycle of an online order or a retail replenishment order but instead highlight the cross channel benefits and challenges of managing a customer order from a retail stores perspective. 
Cross channel or multi channel retailing at its most basic consists of retailers & customers interacting over multiple channels to find, decide on and transact products and services. The conventional sales channels include the online channel, ordering over a phone or simply walking into a nearby store to pick up the product. A customer is engaged in a cross channel experience if he browses say for an LCD TV online and goes to a store next door to buy it. He could also be browsing a mail order catalog after which he goes online and orders the product from say a BestBuy.com. After receiving the TV, he may try it in the privacy of his home and if he does not like the picture or the sound, he may choose to drive to the nearest store to return or exchange it. More and more customers consider this a natural and intuitive process to find, evaluate and buy their products. This ‘natural’ behavior of the consumer is however exposing the chinks within the processes of the traditional store or even pure plays online retailers.
 
While it is understood by retailers and retail practitioners that online sales are growing at a fast clip, there is a much more limited understanding of the fact that as customers are exposed to a multitude of channels they expect these cross channel experiences to be seamless. Recent consumer behavior studies have shown that more than 50% of consumers researched a product online and purchased it offline thus influencing in-store sales. These cross channel customers tend to be younger, more valuable and sophisticated as compared to their single channel cousins. They conduct more research, sort through multiple information sources while making buying decisions and on the whole lead to greater average order values if the retailers can manage to attract their loyalty. Other reports are predicting that the number of cross channel shoppers will increase significantly in the next few years. It has thus become a business imperative for retailers to do some internal soul searching to assess  their cross channel capabilities, identify gaps and put together plans to enhance or transform them.
 
The objective of this series of blogs is to share insights and experiences from just such cross channel capabilities analysis and transformation initiatives of some of the leading retailers and retail practitioners.  As the name implies cross channel capabilities analysis is a rather ambitious concept that encapsulates all the functions and capabilities required by a retail organization to enable a seamless experience for customers irrespective of the channel through which they interact. My focus in this blog series though, would be on the challenges and enablers within the context of ordering within a bricks and mortar store - thus retail customer order management.
 
Let us begin by going back to my example of a customer Joe Shmoe walking into an electronics store to buy a TV. He would try to locate the relevant 'video' section of the store and start browsing there. He would browse through the various TV models and sizes based on various factors such as size of his living room, his perception of the brands available based on recommendations and reviews of friends and experts, the capabilities of the TV, the price range and so on. He probably consults with a knowledgeable sales associate to fill in the gaps of his understanding. This would be classified as the 'Find and Decide' stage of his decision making process.
 
Based on all these factors, he chooses a TV to buy. He now starts thinking of how he can get such a large TV back to his home and whether he would be able to setup such a complicated piece of equipment on his own. The sales associate reassures him that a delivery truck would deliver it to his home the next day. If required he would be accompanied by somebody who will install the TV and walk Joe through the process of using it.
 
He then walks to the nearest register with the details of the TV he wants to buy. He asks questions about what kind of warranties and return policies exist for his expensive investment and decides to buy an extra 3 years of protection. He pays for the TV, the delivery & installation the warranty and taxes using a combination of a gift card he got for Christmas and a credit card. He thus completes the 'Buy' phase of his traditional retail store buying experience.
 
From a retailer's perspective this translates to the following series of steps and processes. To enable easy and intuitive Find and Decide, the store must stock a large variety of TVs. It must provide a large amount of information about these TVs and make sure this information is easily accessible and understandable to their customers. This function is typically provided by an item or merchandise management system. The store must have sufficient quantity of each TV displayed so that when a customer decides to buy one, they can walk out with one. This thus is an availability function managed by the inventory systems.
 
In order to ensure that a large product gets to a customer's home on time, the store must have a fulfillment and delivery system. This must not only take care of the tangible products bought by the customer but also the scheduling and delivery of intangible services such as installation and warranty support. When the customer wishes to pay, the payment tendering (POS) and accounting systems need to support the many means by which a customer chooses to pay for his purchases. Also if in the future, Joe wants to return his TV, the returns management system must be able to pull up his original sale transaction, return the product and refund Joe the amount he paid for the TV.
 
The above describes the microcosm of customer and retailer interactions within the traditional store buying environment. Now imagine that the store runs out of the specific TV, Joe has so painstakingly decided to buy. This then is the point where our story of Retail Customer Order Management begins.

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