Supply Chain Management

Posted by Bharat Rajagopalan at 5:07 PM | Permalink | Comments (0) | TrackBacks (0)

Information sharing can radically improve the way global companies and their partners do business, especially in the wake of increasingly globalization and outsourcing, which has and will continue to have a profound effect on supply chain operations. By exchanging information such as inventory levels, forecasting data, and sales trends, companies can reduce cycle times, fulfill orders more quickly, cut out millions of dollars in excess inventory, and improve forecast accuracy and customer service.

Information sharing can be applied to almost all the core domains of corporate operational activities. Starting from the development chain process where information sharing can happen in the product design stages and product life cycle management activities with both internal and external partners. In the customer chain processes information sharing can help in formulating customer experience strategies, increase customer service effectiveness and operations.

The psychological barriers around information sharing are real and imperative. Sometimes there is a real and justified fear that information sharing across the corporate boundaries can turn into a competitive disadvantage. By formulating effective business policies, agreements and business plans that an enterprise can use to establish guidelines and rules for exchange of information with supply chain partners can help assuage those barriers. This will ultimately help mitigate the fear of information sharing and improve efficiency and create new opportunities for all stakeholders.     

Information sharing can be most effective and least disruptive for all concerned when done by implementing the available technological tools, which would accomplish the process in a controlled and secured way thereby streamlining the global supply chain operations.
 
Collaborative Planning, Forecasting and Replenishment workflows and solutions exist in the supply chain process to enhance supply chain integration and data sharing across enterprises but very few companies effectively use it to their competitive advantage. The current challenges that organizations face in implementing these workflows really revolve around non-integrated processes and systems with retailers and manufacturers operating out of their own silo and different planning data. This results in excessive response times, costs and inventory due to forecast inaccuracy. Retailers on one hand face stock-outs, material shortages, lost sales and poor customer service to name a few. On the other hand manufacturers get plagued by obsolescence and inventory costs impacting margins. SAP's Supply Network Collaboration tool, JDA's Collaborative Supply Planning and Execution tools offer sophisticated and rich workflows to enable information sharing with the extended supply chain partners which not only provides timely visibility into supplier fulfillment constraints but also facilitates speedy resolution resulting in reduced purchasing costs, expedited freight and better supplier negotiating capabilities.

A large apparel, footwear and golf equipment manufacturer implemented key features of collaborative supply planning and procurement execution tool to achieve forecast analysis and collaborative workflows on the planning side and firm order collaboration with vendors on the procurement execution side.  

The gains achieved were two-fold. On the planning side sharing of mid to long term forecast and publishing near term requisition forecast to suppliers and receiving supply commits from them resulted in reduced material shortages and stock-outs at the component level. Additionally, synchronized and tightly integrated procurement and manufacturing planning activities gave planners the ability to quickly re-plan globally based on changes in execution.

On the other hand Intelligent Buyer-Supplier approval workflows facilitated timely visibility of supplier's fulfillment constraints and their resolution by the corporate procurement group, resulting in aforementioned benefits of reduced procurement costs at different levels. The global buying group also achieved execution efficiencies with a single view of all procurement worldwide, managing different replenishment programs and multiple communication channels with their supplier base using a single system.

In the past manual order processing, spreadsheet dependent and fax/phone method of communication with suppliers made a dent not only to the corporate procurement budget but also generated global operational plans that were out-of-date because of limited-to-no visibility into supplier's plan and operational constraints.

On similar lines global organizations can harness the power of technology to collaborate with their supply chain partners to exchange information and work as a single entity. All this can be done with the end objective of having greater understanding of the end consumer behavior and effectively responding to the changes in the market place from a supply chain perspective so that manufacturers make the products only when they are needed and retailers store and sell them to end customers, drastically cutting down on their own inventory levels and associated costs. In the long term timely exchange of information will not only improve supply chain responsiveness but will also enhance cash flow and profitability to every link in the supply chain and ultimately contribute to consumer satisfaction.

AIRBUS Sup@irWorld eSupplyChain Project represents one such successful example in the Airbus Manufacturing industry. Following Link gives more information about that www.gs1.fr/gs1_fr/securedownload/dl/1742/23924/file/Airbus.pdf. I would love to hear comments and thoughts from the readers.

Posted by Rajiv Mehrotra at 9:46 PM | Permalink | Comments (1) | TrackBacks (0)

Grocery segment is one of the most challenging sectors of the retail market today. Some of the reasons why an increasing number of consumers buy groceries online are convenience of shopping and / or Home delivery of purchased items. Growing interest by consumers to buy grocery online; has made retailers to launch internet based grocery selling channel. Since, almost all big retailers have entered into online selling, the competition has increased many fold. Seating at home, customer can browse through different web-sites to get the best deal in terms of price. Since groceries come under commodity segment, the only way retailers can attract customers is, by the services they offer to customers. In short, retailers are trying to attract customers by their method of order fulfillment and delivery.

While basics of order fulfillment have been kept unaltered, the retailers have adopted different locations from which online grocery orders are fulfilled. Several retailers employed mega warehouse model. Online grocery orders were fulfilled from massive, highly automated warehouses with sophisticated carousels and conveyors for order picking. Sooner, they realize that time and cost required to set up such warehouses is extremely high. Due to delay in automation and higher brake even points the cost of delivery became very high. To counter these problems, retailers like Tesco, started delivering online grocery orders from their existing store. In this model, retailer employs teams of people to pick the items of online grocery orders from the shelves of the nearest stores, and teams of drivers deliver the orders at agreed times. This model becomes extremely successful and popular because it offers several advantages. Delivering online orders from existing stores reduces the cost of setting up automated warehouse. Since the orders are delivered from nearest stores, transportation cost also reduces.

However, the volume online orders have ever been increasing. Because of this, when stores are crowded at weekends, the time during which maximum online orders are received, in-store pickers have to jostle their way down aisles and queue like any other shopper. This is severely impacting picking efficiency of pickers leading to cost escalations. Hence, retailers like ASDA and Tesco have come up with the concept of dark stores to fulfill ever increasing internet grocery orders. The dark stores are quiet same as standard supermarkets. They work in a similar way but the only people in them are company staff. Instead of the public browsing up and down the aisles, teams of workers push their own trolleys around to pick the customer orders. Availing the services of dark store, the customers can shop online and collect the order from the dark store within a few hours of ordering them.

From customers' perspective, the dark stores are boon to those who don't like to shop on their own and who don't have time to wait for the delivery of the products shopped on internet. Also, the customers are required to pay lesser amount for attaining the services of dark store, as compared to home delivery charges.

From retailers' perspective, setting up dark store is cheaper than setting up dedicated warehouse. Also, it is more efficient to pick orders from dark stores than from normal stores, mainly because there is no hindrance of other store customers.

However, what retailers need to ensure that, their order fulfillment and management system is capable of handling this model. Since, the window of fulfillment of online orders from dark stores in very short, often in the range of 2-3 hours, the order management system should be(In addition to standard features) -
- Able to send real time inventory updates to website
- Able to monitor the inventory real time and should be able to replenish it in quick time to reduce lost sales due to out of stock products
- Able to modify order picking slots, when order is sent for picking and when it is not sent for picking
- Able to handle situation when customer does not turn up to collect the order in his scheduled time slot
- Able to schedule and release the order for picking to the concerned dark store based on time of order creation and/or other priorities set by business
- Able to take into account, the issues related to order modification (like cancellation, addition of new products etc.) once the order has been already sent for picking.
- Able to handle return fulfillment with features like allowing customer to return the product either to dark store or to the nearest supermarket store

Can you think of some other feature required for order management system to handle order fulfillment from the dark stores?

Posted by Pankaj Sudhakar Patil at 11:42 AM | Permalink | Comments (2) | TrackBacks (0)

Cash on Delivery (COD) as a payment option has existed for a long time, but is fast becoming a popular payment option in some countries such as India. A customer places an order online and chooses the COD option. The order is fulfilled and the customer makes the payment in cash at the time of delivery.

In developed markets such as the US, COD as a form of payment option is still used during pizza delivery; the order is placed through the telephone (or a website) and fulfilled by the nearest restaurant. The customer makes a cash payment to the pizza delivery boy (if pizza is being delivered home) or at the restaurant (if the customer has chosen to pick up the pizza at the restaurant.). Since the use of credits cards is pervasive, it is the preferred mode of payment even for orders placed on retailers' websites.

Compare this with India where as per the Reserve Bank of India, the number of credit card users is less than 1% of the total population. In a scenario such as this, offering COD as a method of payment gives both customers and retailers alike tremendous benefits.
The customer benefits by:
• Being able to place orders online even without possessing a credit/debit card
• Being able to pay when the item has arrived (which I suppose is the 'killer' feature as typically Indians are suspicious about paying for something that they cannot physically see/touch/feel!!)
• Reduced chances of online fraud.
The retailer benefits by:
• Reaching a wider base of customers such as students, housewives etc. who typically do not have a credit/debit card
• Offering the service as a differentiator with respect to competition
• Simplified business processes; if the customer chooses not to accept delivery, there is no refund as there has been no payment. However, if the customer accepts delivery and then changes her mind, it is typically covered under the returns process depending on the product ordered.

There are a few complexities involved too, though. The option can only be offered if retailers have their own delivery fleet or have tied up with carriers to collect payment on their behalf. This adds to the retailer's cost which needs to be accounted for in the overall product pricing.

The COD option has already helped increase sales for Indian online retailers; it will not be a surprise if this becomes a must-have for the future. Let me know if you have any thoughts on this article.

Posted by Amit Ambekar at 10:22 AM | Permalink | Comments (3) | TrackBacks (0)

Guest Post By
Bob Ferrari, Executive Editor, Supply Chain Matters blog

I read a rather insightful Gartner First Thing Monday commentary published at the end of August which was penned by Jim Shepard. This commentary which was titled: Multi-enterprise Commerce Is Still a Problem Searching for a Coherent Solution, was a follow-up to a "storm of responses" to a previous commentary suggesting that multi-enterprise commerce might be the replacement for some current installed ERP systems.

Shepherd's observations are rather important, namely:

• "There was virtually no argument with the ideas that an increasing amount of business activity occurs between companies, and that systems like ERP aren't well-designed to support it. The issue is whether we need to replace ERP systems with some new application designed to manage complex, multi-entity value chains, or whether we need lots of additional applications and services to enable the interaction between our existing ERP systems." Shepherd observed from the responses from end-users that the multi-enterprise commerce problem was characterized by a very high rate of process variability.  While ERP systems are touted to eliminate such variability through process and data standardization, end-user feedback was that data standardization was rather challenging in a multi-enterprise commerce environment.
• Shepherd notes lots of feedback received from end-users representing multiple industry settings who noted that they have successfully brought multi-enterprise commerce together by integrating B2B services, sourcing, demand management and logistics best-of-breed software with their existing backbone ERP systems. End users whose business models were entirely reliant on outsourced manufacturing and services found ERP systems almost impossible to use.

These recent observations made by Gartner should not be a surprise to readers in the Infosys client community since many of you are on the journey toward achieving multi-enterprise commerce.  The reality of today's B2B commerce capabilities are indeed a landscape of best-of-breed technologies that enhance key business processes.  This has come about primarily from the increased influence of business focused or supply chain functional teams who must respond to the pressures of the market or to market opportunities, and candidly cannot wait for the development cycle of the ERP vendor to stay current with today's fast-paced B2B and B2C process needs. While many ERP vendors are closing the functionality gap, it has taken many months, and many of the changes require upgraded platforms and augmented technology. Many companies cannot tolerate the disruption or expense involved in a major upgrade of the ERP technology and application stack. They opt instead for laser-focused and manageable change targeted at key strategic business processes, which provide for more manageable change targeted at specific strategic capabilities.

The make-up the "systems of innovation" or "systems of differentiation" was described by Gartner in its 'pace layers' methodology of applications maturity outlined a few months ago. According to Gartner, "Developing a paced layered application strategy requires deconstructing your portfolio into individual applications and identifying the specific business processes that each application supports." In essence, since the business dynamics of global supply chains and multi-enterprise commerce are so dynamic and fast-changing, companies need to understand what are their core business process needs and augment these capabilities with technology that is best designed to both support that business process yet remain flexible for end-users in their ability to quickly and easily re-design the particular business process. 

The other change that has come about is that many of today's best-of-breed applications have acknowledged their market success lies in the ability to co-exist in a backbone ERP or legacy system environment and therefore provide enhanced integration capabilities that make all systems work together in an ecosystem of information enhancement and business intelligence.

IT and business functional readers, along with Gartner can continue to ponder whether multi-enterprise commerce is a problem searching for a coherent solution.  I believe that the argument is not about finding a new "label" for systems development but rather the reality of a highly dynamic and fiercely competitive environment found in many industry supply chains today with a requirement to constantly adapt.  Companies should focus on the processes and systems that will both differentiate them from industry competition with the flexibility and capability to change that process without major disruption.  The label does not matter as much as differentiated capability and adaptability.

What's your view? Is the debate about "new labels" or is rather about capabilities that often span a single backbone ERP system?

Posted by Bob Ferrari at 8:37 AM | Permalink | Comments (0) | TrackBacks (0)

Yesterday, I, along with a couple of my team members, had the opportunity to present the progress on our Distributed Order Management (DOM) solution to Kris, our Executive Co-Chairman (and CEO till last month). Kris's objective was to understand the solution innovation in what we have done - i.e, building a Reference Implementation on the foundations of Sterling Commerce's base DOM product offering.

This Reference Implementation has been our answer to clients increasing need to get onto the Multi-Channel Commerce (MCC) bandwagon. We've had some good successes of late focusing on the merits of starting off the blocks with a reference implementation in an agile-like manner (I use such terms carefully!) as against blue-sky sessions with a bunch of assorted business analysts and their managers with highly varying interest levels with the finished product looking nothing like what each person there had envisaged in his/her mind.

Retail is an industry, particularly in the US (and to a good extent, UK too) that has been driven by customer tastes (and even whims) the most. This is not just general merchandise alone that I am talking about, even for specialty, apparel, groceries and other retail sub-verticals/chains, the staggering number of customers, item/item categories and even supplier combinations ensure that (hopefully) error free management of high volumes and large sets of transactions has always been the number one priority. Add to this the complexity of trying to make sense of an MCC world (or declining painfully in revenues if one does nothing). Retail end-customers now can use a combination of channels (web, mobile, call center, store, EDI, pick-up & drop points etc) to browse, buy and return merchandise. At the back-end of the supply chain, shopping cart items need to be split and re-aggregated based on stocked/non-stocked items available across central/regional/store warehouses following different delivery models across different suppliers with different lead times.

As Kris was asking of the potential target markets where our reference implementation can help clients with rapid deployments, I was struck by the technology diffusion angle of something as universal as MCC. While MCC is an existential necessity, so to speak, in the Retail world in the US and UK, there are a bunch of other interested parties curiously making tentative experiments and proactively dealing with the beast, well before it is thrust upon them. At the highest level, this diffusion is happening as we speak across four dimensions:

1. Geography - While I cannot say this for many industries, this axiom is true in the Retail world:  What US retailers adopt today, the rest of the world adopts tomorrow (and in some cases, a few years later!). MCC is a concept is now slowly seeping into (as against sweeping across) continental Europe, LatAm and large parts of Asia Pacific - regions which has so far kept the various channels separate and largely used websites to peddle information about goods rather than peddle the goods themselves.
2. Non-Retail industries - Consumer electronics companies like Apple, Motorola and Nokia are not into classic B2B transactions alone anymore. They need to know what their customers are buying and why and are actively looking at engaging in ongoing conversations with them. Just a few years back, selling would have meant trusting the electronics retailers demand forecasts - bullwhipped or otherwise - and shipping products to mandated locations in mandated quantities on mandated days. Ditto with related industries like consumer packaged goods, medical instruments and certain sectors within industrial goods.
3. Tier-2 US Retailers - these are the $1-5bn retailers who're finally opening up to the possibility of cross-channel sales and fulfillment, of using one channel to leverage sales in the other. The pressure factor here is that they won't get the 4-10 years of learning that the Tier-1 retailers had adopting and refining the model - not just in terms of IT landscape, but also everything above and beyond right from sharing warehouse space to store clerk incentivization for online sales. As regards IT, they need to have a platform up and running with all the end-to-end functional integration (web commerce to call center to order management to warehouse management to returns management to financials) in 12-24 months.
4. Internationalization - Like #3 above, Tier-1 retailers are now all going international. This would bring in newer angles of multiple time zones, currencies and localizations (not just in item categories, but in processes too). But where IT landscape is still nascent and evolving, fitting in a pre-built template would be a lot easier that a classic rip & replace strategy.
   

MCC is an idea whose time came a few years back. Vendors like Sterling Commerce (now IBM) caught on to it early in the cycle and consequently, have reaped rich benefits. Large MCC programs though are a lot more than a web-front end and a DOM back-end, it requires order orchestration across applications in the buy-side and sell-side with a solid MDM framework to ensure data stays current and clean. In the meantime, it would be fascinating to watch the diffusion of the MCC-impetus across the various dimensions I mentioned. The good news is that these late comers can study and adopt what has worked well in tier-1 US retailers. The bad news though is that the window of time is fast closing in.

Posted by Gopi Krishnan at 4:16 PM | Permalink | Comments (0) | TrackBacks (0)

Reading about the Debt ceiling debate in the US Congress over the past few weeks, the one statement that consistently stands out is "Spending Cuts". The US sovereign credit rating has just been downgraded, the US debt is too high and suddenly everyone is looking at "Spending Cuts" as the silver bullet that can set everything all right once again.

Another example of what I find disappointingly commonplace: Organizations (a government in this case) cutting spending randomly as a last ditch effort to get out of difficult situation because of not planning and implementing a long term spend management program which would have:

1.  Helped avoid reaching a stage where organizations are forced to make unplanned decisions around cutting spend
2.   Ensured that spending cuts happen as a planned exercise rather than ad hoc, desperate measures.

What organizations (and governments) need is to be more planned and proactive towards the Spend Management function. Here are some pointers which could help avoid the last minute "Spending Cut" issues:

1.  Provide continuous focus towards Spend Management: It is very important for organizations to continuously invest in spend management programs in times of growth so that slow growth or recession periods can be successfully negotiated. Oversight, control and compliance towards Spend in good times helps avoid getting stuck with overbearing and unmanageable spending commitments in times of economic stress
2.  Clearly identify Spend Categories: A lot of organizations do not even have a comprehensive view of their spend categories. Classifying spend into categories provides great spend visibility which generates actionable data and decision making easy.
3.   Analyze the Spend Categories: The analysis helps channelize the organizations resources towards the most promising categories
4.  Picking the low hanging fruits: There will always be categories with a high rewards to effort ratio. Implementing these quick spend solutions will also make the senior management pay more attention to the spend management function. In my opinion spend management is not given its due attention by most senior managements as compared to the revenue generating functions.
5.  Identify Process changes that produce immediate results: Sometimes simple process changes have the potential to bring about a lot of savings. Closely looking at spend management processes which span across the promising categories identified can help bring out savings
6. Enforce Control and Compliance: It is very important to enforce control and compliance for spend which will not only prevent wasteful/ad hoc spending, but will also generate useful data which can be used to continuously refine processes.  
7. Leverage Technology: Over the last few years Spend Management technology solutions have advanced to a high level of maturity. Implementing these technologies tools can provide an advanced level of spend visibility and spend control.

Spend Management is a continuous improvement and strategic function for an organization and should not be a last ditch cost cutting initiative. It is imperative that the management of spending organizations understand the benefits that a well-defined Spend Management program can bring during the times of economic turmoil. 

Posted by Sameer Prashar at 4:17 AM | Permalink | Comments (0) | TrackBacks (0)