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Analysis

Tech to move merchandise

Maria HighlandBy Maria Highland1st October 201810 Mins Read
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What should companies be looking for from supply chain execution systems to meet the challenge of today’s markets? Sam Tulip examines the challenges.

Planning doesn’t move merchandise: performance does. Exemplary supply chain execution (SCE) is no longer optional, but a basic requirement of staying in the game, let alone making any money, in both B2C and B2B chains. Driven by the ‘Amazon effect’ (although it isn’t just Amazon), customer expectations are increasingly onerous and non-negotiable. The full assortment will be available at all times; delivery times will be measured in hours, not weeks, on time and in full. Goods, and their supply chains, will demonstrably comply with a growing range of legal and societal norms. Returns will be accepted, no quibble. And, by the way, this is the standard offer, with little or no premium to pay. To quote a 2017 report from the American analysts Retail Systems Research: “Retailers have had to find ways to get product from wherever it might be available into the hands of buyers, wherever and however they want to take possession of it – and make money too. The new retail normal is ‘never say no’. Unsurprisingly, RSR tout supply chain execution as ‘the next big thing’. Unfortunately, as they acknowledge, they and others have been saying this for quite a few years now. Have manufacturers, retailers, carriers, 3PLs reacted? Is appropriate investment going in to SCE IT systems? More fundamentally, is SCE being considered as a dynamic, end-to-end, multi-channel, multi-partner system, or are businesses still working with a single linear supply chain model, with local optimisations in discrete silos handing off to ‘black holes’ where visibility of product and performance is largely lost? Certainly the classic definition of SCE as ‘yard, warehouse, transport’ no longer seems adequate, yet even the guru at Gartner “generally does not include order management in its definition of SCE”, which may seem slightly strange. Certainly this limited and traditional view is not one shared by the system vendors. “The lines are being blurred when it comes to the traditional definition of supply chain execution and how retailers today need to design their SCE processes for a superior and consistent customer experience across multiple channels”, says Chris Shaw, director of product marketing at Manhattan Associates. “It is no longer just about the last mile, it’s about the first mile, the last mile and everything in between. There is also a need for effective order management, returns management, new store models and next generation POS systems”. As David Houser, senior vice president, international sales & operations, at HighJump, says: “Today, SCE is much more of a broad topic than warehouse, yard etc. It is about data, the consumer, actionable analytics, mobility. The ‘functions’ need to be integrated, provide ROI quickly, and be ‘future proofed’ for the quickly changing demands on the industry”. It is questionable too whether a hard division between Planning and Execution any longer makes sense. Tony Dobson, managing director of Snapfulfil, says: “Supply chain execution and planning are now so close together that it is almost a join. The supply chain is no longer a chain with a series of sequential flows – it is a whole process that continually evolves. Everything must be fluid, reactive and agile, which means that planning and execution can’t be considered in isolation”. Sergio Barata, general manager EMEA at Verizon Connect, would go further. “The scope for SCE solutions is ever-expanding and can now encompass areas as wide ranging as risk management, HR and customer relations. With SLAs becoming more prescriptive and challenging, compliance, risk, and even billing and finance now form an important part of SCE”. At Adjuno, business development director Alan Gunner agrees that: “Supply chain needs to incorporate more upstream or sourcing activity. By managing suppliers, factories and raw materials more closely at the start of the supply chain, retailers can not only save incremental costs but will ensure their reputation is protected as they’ll be able to reduce the risk of a breach of ethical, social or environmental practices. “And in today’s omni-channel retail environment there is even greater pressure for retailers to provide a number of delivery options, as well as further scope when it comes to delivery times. With this in mind, SCE should encompass sales or flow of goods data”. Omni-channel Omni-channel isn’t just about offering customers different ways of shopping, or a choice of delivery locations. It changes the whole supply network architecture – supply chains are less like fixed landlines and more like the Internet. As with an email, the discrete components of a customer order may go on completely different journeys before being consolidated into a single delivery. Among other implications, says Pat Barlow, business development manager at Logistics Reply, the retailer itself is now in effect a distributed warehouse. “Consumers today demand exceptional agility from retailers, who now need constantly to adapt to elevated expectations by continuously changing and expanding their service strategies – noticeable examples of which include home delivery, click & collect, re-purposing (reallocating stock to a different channel), and drop-shipping. “In addition, all of those scenarios must provide for the handling of returns (not necessarily via the same channel on which the product was originally sent out.) From a logistical point of view, this kind of demand requires an in-store stock management system setup that includes the real-time ability to reallocate items instantly to a constantly-changing variety of channels. “Movement of stock used to be a logistical challenge that was managed only at the warehouse level – but one of the consequences of online is that retail stores now require solutions which offer warehouse management-type capabilities”. Impediments to investment Modern supply chain architectures are inherently unstable. We don’t know if consumers will continue to wait in half a morning for deliveries. We don’t know if manufacturing will continue the just in time model, or whether external events (Brexit, for example) will make stockholding suddenly more attractive. We don’t yet know if ‘free’ same day or next day delivery is sustainable for vendors, with or without restrictions and charges on urban logistics. We don’t know which of the ‘yet to be invented’ technologies will have a real impact on supply chain operations. Whisper it, but we don’t know that the Amazon model is the end-game: there could be a quite different model emerging in ten years’ time. So while, according to Gartner, the global market for SCE IT was worth $3.85 billion last year it is not clear how much of this is strategic, and how much is merely tackling current pain points. The continued existence of multiple, often incompatible, SCE systems in companies that have grown by acquisition suggests that this is not a priority area for strategic investment. Many firms don’t know how little they know about their inventory. They can’t see the drivers of excessive supply chain costs, (for example, avoidable returns) and they can’t measure sales lost whether through non-availability of stock or poor customer service. The ROI case is thus necessarily difficult to make. Radical change has other threats – for example, of writing off existing investment in systems, warehouses and other facilities, and uncertainty about which emerging technologies to adopt. There is a fear of losing the often hard-won compatibility with the systems of other partners. Such is the fragility of some supply chains that almost any change is unwelcome – no-one wants to experience that KFC moment (well-established retailer partners with acknowledged world-leader: what could possibly go wrong?). But doing nothing is not an option. Somehow, firms in both B2B and B2C have to meet the challenge of what Pat Barlow calls ‘Everywhere at any Time’ Commerce – “the contradictory goals of product customisation, customer/centric/individualised service and efficient mass production”. Best of Breed/SaaS If firms are convinced of the need for SCE investment, should they be thinking of a big over-arching solution or go more for selected ‘best of breed’ point solutions. Not a simple question, suggests Craig Moore, head of supply chain at DP World London Gateway. “The main benefit of consolidating technology and solutions into one landscape is that this can lower the total cost of ownership (TCO). This is achieved due to the greater visibility and control of operations that a holistic solution provides. By integrating systems, organisations remove siloes that make it difficult to identify and address operational inefficiencies. It also allows them to more effectively implement technologies like automation to eliminate inefficient manual processes. However, this approach can impact organisational agility. Getting the balance right between flexibility and integration is one of the key supply chain challenges businesses face”. Tony Dobson says: “Best of breed solutions will always deliver the greatest benefits but they must be able to integrate in to a business’s existing systems. This is where traditional and cumbersome ERPs, based on old technology, are increasingly falling down. “With the advent of cloud-based Software as a Service (SaaS) technology, integration is now much simpler. SaaS is easier to deploy and much more cost effective than traditional warehouse management systems”. And Chris Shaw adds: “Many organisations do not have the luxury of simply replacing their entire legacy supply chain systems, it is too expensive. That means large architectures built on a single platform become less of an option for most. And those types of systems tend to come with limited flexibility for enhancement and integration. “Best of breed solutions are often seen to be the best option, but integration and time-to-market can be significantly slower depending upon the supporting architecture. To truly get the most from the technology available, organisations should consider providers that can offer a modular best of breed solution. These types of solutions have all the deployment capability but also have pre-integrated, complimentary offerings that can be use within the wider supply chain. This option as opposed to an entire swap out can significantly reduce cost and complexity when retailers need to deploy new functionality to keep up with competitors and future proof their supply chains”. Lucy Pamment, head of product development at Access Group, agrees that: “A big over-arching solution will quite often take a long time to design, by which time your business might have moved on. Essentially such solutions often struggle to move or grow with the business so end up being a compromise which won’t benefit the company. We’ve found that a lot of our customers benefit from putting in place proven applications that solve 80-90 per cent of their problems quickly and then move on to refining the software as they develop. If going bespoke, customers will often try to build the most accurate bespoke specification they can, but understandably they can’t predict the outcome of every change. “From our experience, the main issues seem to be with scope/mission creep, poor specification at the start of the process and the supplier not understanding the needs of its customers – and this is something we believe is so important”. Ironically, there is one arena where sophisticated integration is off the agenda. Steve Purvis, operations director at Bis Henderson Space, comments on the growing phenomenon of shared use warehousing and other logistics facilities. 3PLs and other warehouse owner/operators often have significant underused space; manufacturers and retailers need extra storage, perhaps for seasonal demand or, in the current climate, to hedge against Brexit. Says Purvis “For short term warehousing we need to keep the interfaces as simple as possible – Excel files, email reports, simple web portals to give visibility. It is important that the site WMS can import and export in very simple ways”, regardless of how sophisticated its internal operations may be. Collaboration in SCE could become much more general though, suggests Shaw. “Some retailers are looking into sharing delivery and fulfilment options with non-competitive retailers to ensure a more efficient service for their customers. ASDA’s toyou initiative is a great example of this,” he says.

 

This feature first appeared in the October issue of Logistics Manager.

 

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