Category Archives: Retail

Retailers Are Struggling with Cost vs. Value

According to a recent article over on the National Retail Federation’s on “officemax petco and half price books weigh in on retail horizons key findings” on Retail’s BIG Blog, retailers will continue to be challenged by balancing the demand for value and keeping prices down. In addition, seventy-six percent of participants said the top supply chain strategic initiative for 2011 is cost reduction/cost containment. This should not be a surprise. It’s the tail end of a lingering recession, thanks to the jobless recovery — and this translates into less dollars in customers’ pockets to spend. Raw material and transportation prices are going up again, and this translates into higher costs. Unless the value is there, customers are not going to spend.

However, this does show the heightened need for next generation sourcing techniques throughout the supply chain. Retailers need to get the right high-value products on their shelves at the right price. Manufacturers need to source the right high quality materials at the right price. Material suppliers have to source the right high-value components at the right price to process the raw materials. And each has to insure that the materials flow up the chain at the right time to minimize inventory and distribution costs. Not easy without systems and processes that keep the modern value chain in sync.

S. 510 Is Days Away From Becoming Law – Is This The End Of The Farmers Market?

I must admit that I have been a little remiss where S510 is concerned. I thought it was just another bill designed to improve labelling and traceability through the supply chain and that its net effect, if passed, would be to simply increase costs for any growers and manufacturers who didn’t already have modern systems in place to document and track every step of the agriculture-based supply chain — from farmer’s field to store shelf.

(I know that most manufacturers don’t have these systems in place, but since the technology has existed for quite some time now, I don’t have a lot of sympathy for them. Given the US crackdown on everything import, export, and supply chain related over the last few years with the threats of terrorism and all the tainted food scandals, there’s no way a food and beverage manufacturer could not claim that they did not know it was coming eventually. Plus, there are quite a number of low-cost SaaS and open-source systems out there that can do the job for a fraction of what a good ERP/MRP would have cost ten years ago when the costs were truly prohibitive.)

However, after reading this recent piece by Sam Osborn over the VBS.TV blog, I’m a little worried. Sam is calling it “The Most Dangerous Bill In The History of America”, and if he’s right, he’s not far off.

According to the post, the basics of the bill grant the FDA supreme authority over every seed that will eventually grow into an American food-stuff and the supremacy of this power stretches to the inspection of growing, harvesting, sorting, and storage operations, minimum standards related to fertilizer use nutrients, hygiene, packaging, temperature controls, animal encroachment, etc. And the bill calls for the inspection of any purveyor of food, ranging from a farm corp beast like Perdue to your Aunt Maye who sells blackberry jam at the town fair. This would literally put farmer’s markets and most organic food producers out of business.

And it gets worse, according to Dr. Shiv Chopra, S.510 would preclude the public’s right to grow, own, trade, transport, share, feed and eat each and every food that nature makes. It will be unconstitutional and contrary to natural law. (Source: The World Prophecy)

And the bill, dubbed the Food Safety Act, passed the House of Representatives on December 21 with a 215-144 vote. All that’s left is for President Obama to sign it into law. Is this the end of the organic supply chain?

Intelligent Sourcing through Intesource

Founded in 1999, Intesource is another player in the e-Sourcing / e-Negotiation space, but one with a bit of a twist. Whereas most SaaS providers are trying to sell you the all-powerful self-service fluffy magic box cloud solution, Intesource is still focussed on providing a full-service offering. Specifically, while you are given full access to the platform, their sourcing experts, who have conducted tens of thousands of events for hundreds of companies with a combined supply base that consists of over 10,000 companies, handle all of the event details for you which frees your organization to focus on high-level strategy and analysis. (Of course, if you need guidance in that respect, their sourcing experts are willing to work with you to identify the categories that are likely to generate the greatest ROI.) This approach has proved very successful for them and their customer base, and they typically drive an ROI of 10x for their clients within one year.

In addition to their sourcing expertise, they also have the ability to deliver a customized platform, as they built their entire solution in-house. This customization can go beyond just look and feel and include integration to external systems or new functionality and customized workflows based on organizational processes and best practices.

Platform-wise, they have a fully featured e-Negotiation platform with extensive RFX, Auction, Supplier Information Management (SIM), and document/contract management capabilities, which integrates with Microsoft Sharepoint for those who want a (collaborative) contract and document authoring solution in addition to the ability to track contracts and associated meta-data. And while the platform is not multi-lingual, it is multi-currency and they are integrated with multiple currency exchange data feeds. As a result, up-to-date currency conversions are always available.

With respect to e-Negotiation, or the RFX and Auction component, a buyer can use a templated workflow, capture as much cost and supplier information as they need to, and iterate through as many rounds as required. Plus, there are thousands of templates available to choose from for just about every category imaginable, built up by the Intesource sourcing team over the last decade as they captured the knowledge and best practices that materialized from the tens of thousands of events they ran, many with the global sourcing teams of some of the largest food, beverage, and retail companies in North America (which are the verticals they have particular expertise in). These templates contain complete workflows, customized RFIs, and customized bid templates with all of the relevant cost components. This allows bids to be broken down into unit cost, transport cost, duties & tariffs, utilization costs, warranty costs, etc. And, of course, the auction functionality is full featured and permits suppliers to be ranked against each item, group, or total award; the auction to be automatically extended based on last bid time; and bids to require a minimum decrement.

With respect to Supplier Information Management (SIM), you can capture all of the basic overview, classification, financial, product, service, and catalogue information associated with a company and augment it with feeds from D&B that include risk indicators and MWBE information. You can augment this with your own categories and fields of interest, and collect the data with the built in RFI capabilities. You can also get current marketing pricing on a wide range of commodities, as they have integrated data feeds from over 160 market exchanges.

The document / contract management module is a straight-forward repository- based solution that lets you manage as many documents, and as many kinds of documents, as you want with meta-data indexing and search. Creation capabilities are available through Sharepoint integration.

Based on their extensive workflow capabilities, which supports the hundreds of customized templates that are available across hundreds of categories, they have built a solid e-Sourcing Project Management Module that allows you to not only track your progress, but build your own customized workflows and category templates which can capture a significant amount of detailed information with respect to each task.

Finally, Intesource has an extensive SaaS interface for the supplier as well as the buyer, where the home-page dashboard — which shows current events, previous events, offered awards, accepted awards, pending tasks, etc. — can be customized for each supplier as well as the buyer.

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Inventory Accuracy Isn’t Rocket Science! Why Are You Still in the Dark Ages?

A recent article in Supply Chain Digest on Measuring Inventory Accuracy started off by nothing that the experts are saying that there’s no clear answer because there are so many ways to calculate inventory. WTF? Did I read that right?

The article then went on to say that the editorial staff at Supply Chain Digest did some informal networking and found that the answers were all over the map. Really? Who did they ask? Cave Trolls? We’re not in the supply chain dark ages anymore or, at least, we shouldn’t be.

So what did the editorial staff find in their investigation for an inventory accuracy calculation which defines the expected variance between book inventory and actual count? They found:

  • Jim Tompkins of Tompkins Associates offered the following formulas:
    • Financial: (Reported/counted Value inventory-System inventory Value)/Expected inventory value
    • Operational: Total inventory UOM Variation/Total Expected Inventory
    • Locational: Number of locations with variances/Total locations
  • Dave Piasecki of Inventory Operations Consulting noted that:
    every accuracy measurement is flawed in itself in that it can’t by itself show you a true picture of your accuracy and that you have to devise an appropriate “composite score”
  • Ken Miesemer of St. Onge recommends:
    cycle counts by location or geographic counts (an aisle or two at a time)
  • Doug Baker of Istoner states that:
    they rely on absolute and net dollar variance as well as unit variances from the cycle count processes

Ugh! I don’t get it. I know each of these experts has heard of RFID and the Internet and should know that this isn’t a hard problem anymore. At a high level, here’s what you do.

  1. Slap an RFID on each shipping unit — be it a unit, box, or palette — as it’s produced and enter it into the system.
       Now you know how much you’ve produced.
  2. Each time it enters or leaves a location, scan it.
       Now you know how much should be at each location.
  3. Use a supply chain visibility solution to link up with your retailer’s POS systems and have them upload a feed of units sold every day.
       Now you know how much is left at the retailers and you instantly know, at any time, the upper limit of how much inventory you have in the chain. Actual inventory is last count minus sales since last POS feed minus theft since last physical count.

Now, if you also use the system to track thefts and calculate average historical theft rate by SKU category (by day) and average daily sales rate, at any time you can produce an inventory count that is expected accurate within the sum of the (daily) theft variance and sales variance. Pretty easy, eh? And all you have to do is use the modern supply chain technology systems you should have been using for at least the last half decade. Any questions?

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Kalypso’s Best Practices in Collaborative Innovation

According to a recent Kalypso white paper on “Best Practices in Collaborative Innovation: How Manufacturers and Retailers Can Profit from Collaborative Innovation”, there is an urgency for collaborative innovation as 95% of companies surveyed felt that collaborative innovation was very important to achieving their business objectives. One respondent even went so far as to say:

If you’re not collaborating, you won’t be around in 20 years. You’ll be gone.

With the global economic crisis driving a changing consumer focus on value, the need to streamline supply chains, and the need for consumer safety, companies are under increasing pressure to simultaneously deliver cost reductions and innovation at a faster pace. However, this is getting harder and harder to do in a vacuum. Hence the need for collaborative innovation.

This is a good thing. When successfulm collaborative innovation between manufacturers and retailers comes with a number of benefits which include:

  • differentiation, which makes them more indispensable to the retailer,
  • improved focus on consumers across departments and categories, and
  • brilliant retail execution

for manufacturers;

  • provision of a differentiated shopping experience,
  • more “shoppable” stores,
  • total shopper solutions,
  • improved focus on destination categories, and
  • new opportunities for product and brand differentiation

for retailers; and

  • shared sales and profit growth,
  • better ideas and improved decision making from shared shopper and consumer insights,
  • more innovative offerings, and
  • reduced rework, improved speed to market, and improved execution

for both parties.

But how do you get there? As Mike Oswalt of Fluor, a global leader in international sourcing and procurement, has astutely noted in the past, collaboration is hard to define. No one can quite put their finger on what it is, or how you get there. Outside of a recent Industry Week article I covered when we discussed the requirements for collaborative innovation, there aren’t many roadmaps. That’s why it was nice to see this white paper discuss four best practices of collaborative innovation which included a planning framework to help you get there.

The best practices of collaborative innovation addressed were:

  1. Develop a Strategy
    The strategy should be focussed on a win-win approach based on categories or brands that are best suited for collaborative planning and that represent the best opportunities.
  2. Collaborative Business Planning
    The goal of joint business planning is to align the goals and objectives of both parties around the brands and categories identified as the best opportunities. The iterative process consists of the following steps:

    • Define the Landscape
    • Develop a Growth & Innovation Strategy
    • Co-Develop the Joint Business Plan
    • Jointly Execute with Brilliance
    • Measure, Improve, & Renew
  3. Get Your House in Order
    Internal obstacles — such as management challenges, organizational challenges, and business process challenges — are often the largest roadblocks to executing upon collaborative innovation. Company leadership of both parties must provide support, incentives, and resources and the focus has to be communicated throughout both organizations.
  4. Build a Trusted Relationship
    This type of relationship can create a “barrier to entry” for competition as well as provide a competitive advantage as trusted relationships result in greater information sharing, which is a cornerstone of innovation.

Not a bad set of recommendations at all. The report also concludes with some questions to ask in a self-assessment to help you determine if you’re ready for collaborative innovation. You might want to check them out.

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