Heading for global integration

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In the dim and distant past, companies used to have purchasing departments. Then purchasing became procurement, then sourcing and now – as AMR Research puts it – ‘responsive sourcing’. Long ago, too, buyers used to have a comparatively small list of companies they bought from. Many were reasonably local, spoke the same language and operated in the same time zone.

Today all that has changed. For a great many suppliers in all product sectors the internet is now their most effective advertising medium, taking their wares to a world market where buyers in Buxton will order from Bangalore or Budapest as happily as they once did from Birmingham. The dot-com bubble may have burst but its legacy is a fast-shrinking world linked by the web. 

Five years ago the prospect of such global trading seemed so daunting that companies were happy to join forces in public exchanges to ease the pain. But technology doesn’t stand still. While some exchanges continue to thrive- GNX, for example recorded e2.5bn of auction transactions in the first quarter of 2004 – many have been overtaken by companies simply doing it all themselves. Today IT enables individual companies to operate their supply chains to the same level of complexity that once seemed only possible by sharing resources.

Automatic paperwork
German retail group KarstadtQuelle, for example, uses sourcing software from QRS to handle international orders and shipments. The company has augmented it to handle some 70 per cent of imports automatically. The system tracks shipments and generates the correct customs documentation automatically when goods are due to arrive. ‘Before we had to wait for faxes to be exchanged and checked,’ says Georg Gurowski, IT manager for KarstadtQuelle’s foreign offices, ‘now the paperwork is automatically generated which saves time and simplifies processes.’ 

KarstadtQuelle has already linked its international logistics providers into the system and is now rolling it out to product suppliers so that they will handle much of the data input needed directly.

‘The logistics of global sourcing is no longer the time-eater it once was,’ says Wolfgang Wanning, principal with Kurt Salmon Associates in Düsseldorf, ‘The biggest delays are the decision process and retailers are increasingly using technology to speed this up using automated event management and interfacing directly with suppliers to reduce duplicate data entry.’

This collaborative approach to sourcing is only one aspect of the seamless integration through the supply chain which is transforming retail operations. AMR Research sees responsive sourcing as a combination of product lifecycle management and traditional supply chain attributes. Linking store-based forecast data and product segmentation with supply factors to reduce lead time and increase product availability in store. Mark Hurd, CEO of NCR puts it even more succinctly, stressing that ‘supply chains begin and end at the store’.

As well as systems integration, event management, and the sort of responsiveness supplied by KarstadtQuelle’s automated customs processes, global sourcing demands data synchronisation. It is clearly essential for all trading partners to be using the same product descriptions and coding.

Companies such as French supermarket chain Carrefour are already well along this route: ‘For maximum benefit we need all the information for our supply chain to be provided to us electronically by all suppliers,’ says Jeremy Hollows, Carrefour’s B2B director. ‘But most manufacturers haven’t a clue how bad their data is.’

Carrefour has worked with several of its suppliers on proof of concept models, creating a common catalogue or product registry that can be accessed by all trading partners by various means, and it plans to roll out its data synchronisation model to its French and Spanish operations this year. ‘We have a proven business case for the project,’ adds Hollows, ‘and we can see at least 40 areas for beneficial pportunities.’

While RFID continues to hit the headlines as the ultimate solution for supply chain visibility, Hollows maintains that before any organisation even contemplates such a project it is essential to achieve data synchronisation. ‘This has to come first,’ he says.

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