The Infosys global supply chain management blog enables leaner supply chains through process and IT related interventions. Discuss the latest trends and solutions across the supply chain management landscape.

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April 28, 2010

Impressions and Conversations Held at the Recent Sterling Commerce Customer Connection 2010 Conference - The State of Global Supply Chains

During the recently held Sterling Commerce Customer Connection 2010 Conference, I had the opportunity to speak and interchange with a number of various industry supply chain and IT executives.  The good news was that unlike previous conferences, the mood among supply chain and IT teams is much more upbeat than 2009. There is a sense that the days of dark gloom are behind and teams can now focus on what really needs to get done across global supply chain business processes.

One highlight of my activity was the opportunity to sit with some members of the Infosys supply chain leadership team to discuss the state of global supply chain as companies approach a period of post-recessionary transition toward growth.  My discussions included Gopi Krishnan, delivery manager and lead for SCM, Atul Pandey, Industry Head-Enterprise Application Integration and Services, and Jai Sankar, Vice President, Enterprise Solutions.  Discussions also included other members of both Infosys and Sterling Commerce technology marketing and implementation teams.

My goal in these conversations was to seek consensus of the most important global supply chain business and IT challenges facing multi-industry supply chains.  Often, when I facilitate such a discussion, I look for points of agreement, and I certainly found many.  One of the most obvious conclusions is that overall business and supporting supply chain challenges remain extremely dynamic.  Doing more with less, insuring more agility and speed across supply chain business processes and responding to challenges unknown remain top of mind. Many organizations have weathered the unprecedented challenges brought on by global recession by implementing dramatic cost reductions in most areas of supply chain processes.  As businesses now turn their attention toward growing top-line revenue and customer growth, a dual challenge of continued cost reduction along with insuring business process agility are the new marching orders. 

Easier said than done!

As Gopi pointed out in an earlier Infosys blog posting, static business process transformation roadmaps are no longer valid.  The speed and rate of change presented in this new business environment require more dynamic planning, plans that will dynamically change with events.  The bond between functional supply chain and IT requires seamless capability in managing changes. Who could have predicted a complete stoppage of all European air traffic because of the effects of a volcano, or the increasing frequency of so many supply chain disruptions?

Industry business models are also changing.  Atul Pandey and Jai Sankar astutely noted that high tech and consumer electronics supply chains are transforming into models that once reflected fashion-oriented supply chains, where products change rapidly, time-to-volume is critical and the window of maximum profitability is narrower.  Companies such as Apple, Cisco and Intel have all transformed their supply chain capabilities toward maximum agility and flexibility.  We can all marvel at the layout of a typical Apple retail outlet, with so much of the floor space dedicated to the customer experience.  Yet, many of these retail outlets are replenished multiple times per day, and volume levels of unit sales are staggering. In many cases, B2B centric is moving toward more mass-market centric supply chain models.

Within the retail industry, many retailers continue to emphasize that consumers are much more sophisticated in their buying patterns, and more and more of these consumers expect a multi-channel buying experience.  Consumers want the flexibility to research product features, place orders directly online, and have various options for delivery, pick-up or return of merchandise. While many retailers seek multi-channel commerce (MCC) capabilities, the journey has to be undertaken in business process and IT capability segments.  An important learning exchange brought out by Infosys consultants is that where the rubber really hits the road is in how companies plan for implementation planning.

One of the questions I posed across many of my interviews was the following- What is the singular most important capability that SCM professionals should be focusing upon in this rapidly changing post-recessionary environment?  Some point to the need for manufacturers and retailers to be able to "think outside the box."  Since most of the more easily identifiable supply chain cost savings have already been identified and implemented, companies have no choice but to continue to challenge traditional thinking.  Increased interest in cloud computing alternatives, the trading-off of capital (Capex) vs. operating expense (Opex) on the balance sheet, and more innovative supply chain outsourcing alternatives all seem to be on-the-table. Important board discussions relate to what are the core supply chain capabilities that can differentiate a company from its competitors, and they invariably will include cost, assets, technology and agility considerations. Each business may well have different needs, but the conversation seems to be moving beyond traditional thinking.

Finally, if there is one capability that many agree will be the most important going forward, it is the ability to be able to sense and respond to the many changes that will occur over the coming months.  More than any other time, change will be a constant across global supply chains.

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

April 22, 2010

Toyota Recalls - Opportunity in disguise

Over the last few weeks a lot of noise has been created with the recall of millions of Toyota's prized brands. Even the best selling cars like the Prius and now Corolla were not spared. Not to say the least that it is acceptable but I am amazed at the coverage being given to this. Car recalls in the automobile industry is a fairly common practice even with other large auto manufacturers having recalled their vehicles at one point of time. Rarely has this tarnished the image of a company to the extent it is affecting Toyota. In fact, recalling vehicles back was not long ago, considered a mark of maturity on the part of the manufacturers, its dedication to quality and regard for customer satisfaction. This definitely gives a sense of the changing times in the automobile industry and the supply chain market as a whole. But if we leave aside the company part of it and dive into the reasons I feel that a lack of Integration between the various entities is a possible reason for this fiasco. I will just take two points into consideration that I feel account for a major part of this issue - First, incomplete supplier collaboration,  Secondly, improperly planned growth.

Incorrect supplier collaboration - As in the case of Toyota a lapse in the coordination between the two parties can have serious repercussions. Their needs to be a seamless integration between the two to make sure that all relevant information ( be it parts design, forecasts or any other ) is transferred to the other party seamlessly and so also their must be adequate check points to create alerts in the event of any deviation from the set procedure.

Improper planning - Over the last decade we have seen a phenomenal growth for Toyota, and I feel that though the goal to achieve 15% of global auto industry was set correctly the execution has failed at multiple points. Among these failed points is the failure to anticipate growth with a back up of skilled resources leading to unskilled workforce and deteriorated quality being applied to the production. The crux of the problem here too I feel is the lack of proper Integration between various Enterprise functions. A proper sharing of forecasted growth with the right amount of planning between various functions like the manufacturing, HR and finance would have resulted in a better management and efficient tracking. This would definitely have resulted in proper hiring plans, better training and lower quality defects.

Though not to say that Toyota lacks in the systems but it definitely shows the opportunity that is available for leading IT service providers. Not to mention that if a company of this proportion has so such a humungous opportunity, then for the industry as a whole , the supply chain market has just started to open up. Clearly its not about having best systems working in isolation or processes that are benchmarks in the industry, it is about having a confluence of the two aided by real time transfer of all business relevant information to each stakeholder.

I am sure there would be a lot of thoughts and inputs on this opportunity at hand, do share them across to all.


 

April 19, 2010

Reducing Healthcare costs - Digitization of Patient Records

Ever had a look inside the records store-room of your physician? When I got a peek into the record room for my healthcare physician sometime back, I was overwhelmed with the sheer amount of physical files and paper I saw. Took me back to my visits to government offices in India a long time ago, when paper files were almost ubiquitous in the recordkeeping stores, and the musty smell of paper was all pervasive. Recordkeeping in India since then has moved many echelons ahead, and computers have replaced those physical files.

So is my physician, in these current times with his tons of paper records, an anomaly in the healthcare industry? Apparently not!!! Seems like paper records are more the rule than the exception in this industry. As per studies, almost 91% of independent and small practice physicians in the US still primarily use physical paper records.

Now that is a lot of paper consumption, and more importantly, a wad of overhead cost:

-          Every time I visit any doctor for the first time, even if I was referred to one, there is a replication of endless paperwork for gathering my medical information and history, followed by duplicate medical tests.   With healthcare costs being as high as they are, all this overhead cost for duplicate data gathering is a criminal wastage.

-          Paper record silos in the doctors' storerooms reduces the efficiency for everyone  involved in the healthcare process - from the patient to the doctor, to the Insurance company right up to the Pharma company trying to come up with latest drugs.

It is in this light, that the mandate (in the healthcare reform bill passed in US) to have patient records digitized in the next 5 years assumes significance. The ultimate aim is to have a national repository and electronic database for health records. Hopefully, with data being more readily available a big chunk of the overhead costs will be eliminated. 

The sourcing and procurement phenomena prevalent in all buying organizations today, started with the need to reduce costs by eliminating the paper documents and the inefficiencies associated with them. That moved on and developed into the advanced Sourcing and Procurement processes, marketplaces and solutions that have saved tons of money for all of us. I wonder if the digitization of health records can spawn a new era of Healthcare marketplaces and sourcing, which reduce(s) costs for all the involved stakeholders. Or maybe eventually breed a marketplace, where providers and corporate consumers can come together in a way similar to the sourcing marketplaces that exist for buying organizations today.

 

April 7, 2010

WMS ROI - Points to Ponder

Understanding what ROI a WMS can provide before deciding to get one implemented in the warehouse is the foremost exercise that needs to be carried out. You need to look at your current efficiency levels are and set expectations once a WMS is put in place.
Some question that are worth considering:

- Is your stock traceability accurate?
- Are there frequent miss-picks?
- Do you have excess manpower that is not utilized efficiently?
- Is the warehouse space efficiently utilized?   
- Is the right Material Handling Equipment(MHE)selected to picking? 
- Do you have a well defined inbound and outbound operational rules being followed?

If your answers to these questions are not overwhelming, well then you need to look at how a WMS would bring about increased level of performance in your warehouse.

The first aspect that is most important for a WMS implementation is to have proper discipline followed on each warehousing operation being carried out. This discipline needs to be chalked out based on what your WMS system is capable to offer. You need to set your processes in place to have the WMS provide the desired results, for example, if you carry out random putaway for all items irrespective of the item's characteristics, a WMS would expect you to have putaway rules to be in place first so that you set it up in your WMS to have the items in the right place and achieve maximum utilization of space.

Analyzing the details of each operation that would lead to cost savings would help you in understand on how soon you can achieve your ROI. For example, if currently 1000 pallets are picked in a day and it takes 6000 mins to do so, it means that you are putting in 6 mins to pick per pallet. Such data needs to be collected and analyzed with the new pick rate after the WMS has been implemented. Say, after 6 months, you find that picking rate is now 1000 pallets in 4000 mins, which means that there is now a saving of 2000 mins, which translates to 4 mins per pallet, leading to a 33% saving in time. Since there is a considerable saving in time, your warehouse now has the capacity to service new customers. 

In the same way it’s important to look at various operations that take place in the warehouse that have a direct or indirect impact on time and cost and then analyze them to arrive at the overall cost savings.

Once implemented, a WMS would generally achieve its ROI in a year's time, however, it could be much longer if you have complex integration requirements like integration to conveyor systems, pick to light or voice pick systems, sorters, carousels and other host systems like ERP, OMS, TMS etc. ROI depends on how soon your system starts optimizing the warehousing processes, which translates to increased accuracy in inbound and outbound process, maximum productivity and efficiency, leading to increased levels of customer satisfaction. The more customers are pleased with your service, the more continued business you will have with them. This would also mean that you have raised the bar for service levels and are ready to take on new customers as well.

April 5, 2010

Demand Planning in Oil Field Services sector

Well, this blog of mine is focused on demand planning issues and solutions in the oil field services (OFS) industry segment. For those of you, who are new to this sector (just like me), Oil field services companies are a critical component in Oil & Gas value chain. These companies provide products and services to the oil and gas producing companies (also known as operators) in the upstream processes such as drilling, formation evaluation, completion and production of wells etc.

As you can understand, they depend heavily on the operators for their business and therefore, their growth is driven by how fast the Oil & Gas industry is growing. All of us know the typical external pressures that the operators face – oil prices, recession, credit crisis etc, that directly impact their business performance, and hence their capability to continue production. Oil field services companies, although they are big in size, but still largely depend on operator’s spending ability to produce oil and gas.

I am currently working on an assignment that is about demand planning issues that the OFS players face and how do they mitigate some of these challenges - such as how can they improve forecasting processes, manage inventory, reduce mismatch in inventory across sites etc. How mature are these players in demand planning space? I want to know at what level is the demand forecasting done. How is the forecast arrived at? How is the product demand (tools and equipments) derived assuming it is make to stock and assemble to order scenario? I know, most of these companies run heavily on ERPs such as SAP and Oracle, but what are the typical planning tools they use?

I know, they sell jobs and services, which would be a product + services wrapped around it and there is a significant amount of variation of what these jobs constitute across regions… for example, the same kind of job would constitute very different set of tools and equipments, if it has to be deployed in two different regions – for example say mexico and north sea. So there are lot of such industry specific nuances that are very relevant while designing a demand planning process.

Looking for point of views from folks who have worked in this sector and can provide me relevant pointers. Please feel free to comment anything, and I would really appreciate if you can share your experience. I would be more than happy to discuss one on one over a telephonic conversation, so please do respond, if you think you know what I am asking for ….

Fighting Gift Card Fraud

Last week I had a meeting with the Director of Loss Prevention at a leading retailer. I was giving him a brief walkthrough of the proposed payment processing process for the new OMS being designed for implementation. In course of discussion a few surprising statistics, on the extent of gift card fraud and how easily the scammers got away with it, prompted us to investigate possible loop holes in the whole gift card fulfillment and redemption process.

Scammers have moved on from the first generation frauds of skimming and duplicating gift cards onto using fraudulent credit cards to buy gift cards through bot rings and exploiting the lack of multi channel coordination between online and stores to do double buys on same gift cards. Ever since gift cards were introduced, they have been an easy target for fraud for multiple reasons such as:

  • Retailers treat it as cash and it gets redeemed immediately
  • Can be bought through internet and be shipped to a forwarding address. Virtual gift cards increase the exposure even further as there is no physical fulfillment involved
  • Viable resale market for stolen or fraud gift cards
  • Multiple payment processing rules for online and stores create fraud windows that are easy to exploit in today's mobile commerce world
  • Fraud prevention systems are still not integrated for all payment methods, specifically gift cards
  • Gift card fulfillment and redemption management is often outsourced, leading to vulnerability to fraud due to insufficient tracking of card acquisition and usage in the card lifecycle.

Most of the above loop holes can be plugged through retailer's internal efforts of building a common platform for payment processing that would reduce the fraud window due disconnected channels. However the last two factors were the one we thought as something that requires a concerted effort from major retailers, stored value card companies and fraud prevention product developers to integrate a robust gift card fraud prevention framework into the gift card acquisition and redemption lifecycle. On toes of recent introduction of  virtual gift cards by a leading retailer, if you are considering adding those to your payment methods and SKUs, do take out sometime to revisit and reconsider it as an opportunity to invest in a superior and integrated fraud prevention system for your multi channel endeavor.

April 2, 2010

Blog 3: Retail Customer Order Management Blog Series: Part 3 – Merchandizing

In my previous blogs, I have provided an introduction to Retail Customer Order Management (RCOM) and the reasons why store organizations are increasingly looking at a retail order as a viable construct to manage new product categories and processes to ultimately enhance the store business model. I would now like to address the item or merchandizing aspects of enabling RCOM.

The retail and direct businesses are traditionally completely different organizations or divisions of the traditional retailer, thereby having separate master data management strategies. The merchandizing function has created different processes and systems and retains different sets of buyers across various channels. However to enable order taking at the store, it is necessary that the direct item catalog be available on the store systems. This information must be imported into retail systems such as POS. This creates several challenges for the retailer as discussed below.

Product Assortment
The retail and direct merchandizing divisions must first jointly determine the appropriate item assortment to be sold through the 'hybrid' channel. The challenge lies when both divisions either try to control this new lucrative channel or are unwilling to maintain the new addition to their product portfolio within the existing structure.

Another key challenge is the difference in product hierarchy between the various channels. If a coherent item data strategy does not exist for the retailer, the same item may be classified differently by each channel. In a retail organization the product hierarchy plays a very important role in merchandising thereby making these differences difficult to overcome.

Pricing and Promotions
Customers often experience different pricing and promotions between channels. For instance, they research a product online and decide to purchase it based on an online price or promotion. However, when they visit their nearest store they find the pricing is different or the promotion unavailable. This discrepancy exists because the two channels address different target audiences, have distinct competitors and thus adopt different marketing strategies. Further the pricing is determined by different merchandizing organizations.

In the world of cross-channel retailing discrepancies between online and store pricings/ promotions create consumer dissonance. When a customer visits a store to convert a buying decision made online these differences may cause him to discard the sale all together. Further, when customers purchase a product online and then attempt to change or return it at a store the store’s systems often are unable to trace the transaction. These customer issues are significant enough to result in class action suits.

Recommendations for Store Merchandising
The solutions to the above challenges lie in creating a comprehensive and common item master strategy. A single item or merchandising master

  • Prevents duplication of information across all systems and ensures consistency of data across the enterprise
  • Enables reduced item setup and maintenance costs
  • Ensures a standard product hierarchy. It has a predefined structure for capturing and storing channel independent information (70% of most item information) and supports standard product lifecycle management.
  • Channel-specific item attributes have their place in such a common master
  • Leads to consolidation of merchandizing operations allowing greater leverage with suppliers due to the larger volumes.

Once all item related data is uniformly stored on the common item master, it must now be made available to the store’s systems. Maintaining the information on the item master is difficult since most item masters cannot handle the transaction processing capabilities required of the individual applications. Further systems like POS and online dotcom or order processing engines have different ways of storing and using item data.

This challenge can be handled by creating a common item master feed that different downstream applications can subscribe to. Items to be sold across channels (store + online) can now be routed to the appropriate store systems (including the POS) by following the regular route for all other store specific items. The challenges of managing pricing and promotions across channels are more complex to solve due to the genuine business needs and benefits of keeping them different. The need to respond quickly to channel competitors is acutely felt in the domain of pricing and promotions. However managing price changes are tactical in nature and must be localized in order to prevent affecting margins at an organizational level. A common merchandizing or pricing system ensures consistency provided it remains flexible to handle various requirements of the store and online channels. Another best practice is to allow cross channel visibility to pricing and promotions such as the setup of common coupons and promotions that can be used across different channels.

We have thus established in this blog that in order to enable successful retail customer order management in store it is very important to have a common and coherent merchandizing strategy across the online and store channels.

April 1, 2010

Smarter Buildings for a Smarter Planet: Johnson Controls Case Study

These days, everyone seems to be going green. For many that means switching off all lights during the earth hour or taking a cloth bag to the grocery store. For Johnson Controls, it means far more than that. It’s one company that walks the talk when it comes to leading edge building efficiency and sustainability initiatives. When Johnson Controls expanded and remodelled its Glendale, WI global headquarters the objective was to make the campus first LEED certified platinum facility in the state of Wisconsin. LEED is an acronym for Leadership in Energy and Environmental Design and is a nationally accepted benchmark for the design, construction and operation of high-performance, environmentally sound buildings.

The 33-acre campus includes 306,359 square feet of new and completely renovated office space. It includes geothermal heat pumps, photovoltaic energy, underfloor heating and cooling. Efficient use of skylights and bigger windows increase the use of natural light and reduce dependence on artificial illumination. Rainwater harvesting is used to flush toilets.

For any green project, it’s vital to get the entire project team on board from the beginning. Early planning was facilitated by the use of Building Information Modeling (BIM) software. It provides a three-dimensional view of the exact design and construction measurements that are shared by all project members. BIM helped in avoiding costly mistakes that can happen in traditional construction.

The single most innovative environmental element of the project is the geothermal heat pumps. The geothermal system is a closed loop heat exchanger system using water flowing through the loop transferring heat to and from the earth via vertical piping bore walls.  Pipes are driven into the soil beneath the site to utilize the earth’s stable interior temperature as a means for reducing mechanical heating and cooling requirements.

  • Winter mode: Using the geothermal system, the heat pumps are much more efficient than using natural gas hot water boilers and reduce the operating costs for heating by approximately 29%.
  • Summer Mode: Using the geothermal system to reject the chiller’s condenser heat is more efficient than using the cooling tower and it helps reduce the chiller’s operating cost by approximately 23%.  During summer, the heat pumps have approximately 57% less operating costs than using gas hot water boilers.

The facility also has ground mounted solar array of around 31,115 square feet and contains 1452 panels. It generates 400 kva. Solar generation supplements electricity needs while reducing greenhouse gas emissions by 1.1 million pounds per year for the campus

The buildings have skylights and increased window space which reduces the use of energy for indoor lighting. The shades of the glass buildings are automatically controlled for efficient illumination of the workspace.

A 30,000-gallon cistern captures rainwater from roof surfaces on new buildings for reuse, reducing potable water consumption for new bathroom fixtures by 77 percent or 595,000 gallons.

All of this is tied together using the Johnson Controls Metasys building management system to coordinate all activities across the facilities and provide a single point of access to performance indicators – the information required for optimizing building efficiency, comfort and safety.

The campus is a continuation of Johnson Controls legacy that began in 1885. Its three global businesses — Automotive Experience, Building Efficiency and Power Solutions — continue to drive toward its mission of delivering a more comfortable, safe and sustainable world.

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