SUPPLY CHAIN STANDARD OCTOBER 2008
www.supplychainstandard.com
● Breaking up the bottlenecks – does your supply chain
allow for time-phased changes to planning and orders
or allow for a synchronised view of demand signals?
● Moving from static to demand sensing and shaping
– does your supply chain capture POS information or
use levers such as profitability and capacity as
decision-drivers?
● Rationalisation of supply sources – does your supply
chain have the ability to analyse optimised flow
strategies based on market conditions and unplanned
events or have the ability to rationalise suppliers to
minimise risk? Does it have the ability to determine
postponement strategies?
The forces of change in the retail supply chain will
lead retailers to look at new technologies that can
shape and build strategic value for the business. A
supply chain built on intelligent information provides a
transparent view across all supply chain nodes that will
ultimately drive improved value. Infusing science into
business intelligence through a unified predictive
platform, on a single forecasting engine will drive better
allocations. This will also improve merchandising sellthrough
rates. Integrated and aligned planning will
improve overall strategic planning and execution.
Finally, this improved approach leads to a better use of
inventory owned, leading to maximising gross margin.
It is not uncommon for retailers to experience
double-digit improvements in inventory, while
sustaining and improving service levels. For
retailers looking to manage the speed of retailing,
advanced inventory planning solutions are too
compelling to ignore.
SARAH TAYLOR, SENIOR INDUSTRY DIRECTOR,
size of product range and IT system capabilities. The
integrated multi-channel retailer needs to change its
whole way of planning and inventory management.
Direct channels are no longer a separate product order,
or treated as an additional large store. They need to be
incorporated into all forecasting and planning, and there
will be a constant dynamic between store and direct
channels. The organisational structure may need to
change to support new ways of working. If there are
separate merchandising teams for stores and for direct
channels, these should be integrated, and will need
enhanced training and systems.
In terms of IT, the starting point for integrated
fulfilment is the warehouse management system. Many
leading WMS systems now enable picking of individual
customer orders as well as store orders, with the
associated stock management functionality. Interfacing
with the web front-end (and call centre systems) is
critical, especially if accurate product availability is
displayed to customers.
There are three initial steps that can benefit every
retailer embarking on the journey to multi-channel
integration: analyse your current business, review
what’s in place and identify the gaps, and take action to
generate immediate benefits.
EMEA, ORACLE RETAIL.
RAY FOWLER, DIRECTOR, CVL
ENCOURAGING LONG TAIL IT
Managing that long and often eclectic “tail” of small suppliers
more efficiently has been a preoccupation for many retailers in
recent years – why is it proving such a problem?
PENELOPE ODY
Despite whatever the latest figures from the
Office of National Statistics – robustly “disputed”
by the British Retail Consortium – would have us
believe, sales in the high street are rather less
than buoyant. The ONS’s 3.8 per cent year-on-year
increase in July was really, argues the BRC, a 0.9
per cent decline. Footfall figures have been
declining steadily for much of the year and many
retailers will be contemplating Christmas with
rather more trepidation than usual.
Will consumers throw caution to the wind and
rack up mega credit card debts as they splurge on
seasonal festivities – or will those rising food and
energy bills finally dampen the Christmas
extravagances? For retailers, accurately estimating
demand and avoiding massive over-stocks will be
vital – as will providing plenty of variety and
differentiation to tempt shoppers.
It is a time of year when products from small,
seasonal suppliers dominate the goods inward
bays and when – inevitably – paper and mistakes
proliferate since few of these occasional trading
partners are likely to use the sort of dedicated
electronic trading tools so familiar to large CPG
players. Persuading the long tail of minnows to
“go electronic” has been on many retail wish lists
for the past couple of years. “Reducing costs
means hitting the long tail,” says Tom Varghese,
senior global product manager and SMB
specialist at GXS. “Many are seasonal or shortterm
suppliers and they don’t want to invest in
dedicated software.”
Web form technology and EDI over the internet
have made it far simpler for small suppliers to
exchange orders, invoices and advanced shipping
notices (ASN) with their customers but, according
to Varghese, the reluctance to use such systems is
perhaps more on the side of the large retailers
buying from these SMBs than with the small
businesses themselves. “There is a perception
among large IT departments that SMBs are not
worth troubling with – that the effort to set up
electronic trading is not worthwhile; also that
SMBs will have little if any technical
understanding or capability – yet all of them will
be using the internet and PCs.”
Sterling Commerce, which has also been
encouraging its user base to explore the “long
tail”, worked with AMR Research earlier this year
on a project investigating “long tail” dynamics in
the inbound supply chain. The study covered a
range of manufacturing and retail businesses in
the US, UK, Germany and France and found that
44 per cent of players – mainly in CPG and retail –
did not have a defined core group of suppliers.
SCS:VIEWPOINT 09
Some 18 per cent of those questioned confessed
to a supply base that was 100 per cent “made up
of small suppliers” while 26 per cent said their
supply chain volume purchasing was “evenly
distributed” among many suppliers: clearly
establishing conventional EDI and regular
electronic trading routines with these non-core
partners could be something of a problem.
“Supply chain visibility is essential today,”says
Josh Hardy, Sterling’s global product line manager
for its Sterling Collaboration Network, “and that’s
difficult if you have no form of electronic trade
with such a high proportion of your supplier base.”
On-demand solutions and web portals, argues
Hardy, make it easy not just to exchange data but
to expand functions like transport management
and global tracking more usually associated with
large players. What seems surprising about all
these initiatives and emphasis on poor
collaboration with the long tail is why, in 2008, it
Persuading the long tail of
minnows to “go electronic”
has been on many retail wish
lists for a couple of years.
all seems so difficult? With around five per cent of
UK shopping now online, according to Verdict, a
great many of us are used to completing web
forms, tracking our purchases electronically and
receiving the consumer’s equivalent of an ASN
with those emails from the likes of Amazon telling
us our order has been dispatched. If retailers can
provide this level of supply chain visibility for their
customers, why is it so difficult to use similar tools
with their small suppliers?
Put such a question to the IT vendors
promoting long tail tools and they tend to agree:
modern technology makes it all very easy, what is
lacking is the willingness of IT departments to
take such projects on board. As Tom Varghese
noted, the AMR study also found that IT
departments liked to focus on larger core-related
projects and ERP leaving long-tail collaboration to
business departments which often lacked
technical expertise.
With a challenging Christmas ahead, a lack of
supply chain visibility – to know whether the
goods are in transit or could still be cancelled –
will certainly add to retail woes.
PENELOPE ODY IS A REGULAR COLUMNIST FOR SCS
AND IS A RETAIL MARKET SPECIALIST.
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