Category Archives: Technology

A Synchronized Extended Retail Industry Optimizes the Supply Chain

Recently, TIBCO Software Inc. released a whitepaper entitled “Synchronizing the Extended Retail Ecosystem” (RetailSystems, registration required) discussing how retailers are being challenged by the consumer to provide solutions quickly and efficiently (“Time”) by offering the right combination of products and service and 100 percent “trip assurance” (“Value”) and making actionable information available at the point of decision (“Information”). How retailers are challenged to be a “brand” unto themselves”. And how in the Extended Retail Industry (ERI), retailers are part of an ecosystem of participants including manufacturers, wholesalers, logistics companies, and other service providers that [need to] work together to create solutions for the consumer.

However, the key takeaway is in the overview of traditional retail value chain and the potential value of ecosystem synchronization. Traditionally, product availability is guaranteed by excess physical inventory. This causes a distributor to over-inventory which, in turn, causes a manufacturer to over-produce. This produces a net effect of slower inventory turns, the need to sell-off excess inventory, and a negative financial impact. However, a synchronized retail ecosystem where a retailer is linked into its distributors which are in turn linked into their manufacturers, allows the retailer to share updated demand data in real time, allows the distributors to meet the retailers demand without significant overstocking, and this in turn allows the manufacturers to produce the right quantity. In addition to significantly reducing excess inventory, it allows for faster inventory turns. Furthermore, the distributors will see patterns across the retailers they support for different product lines and can push normal usage data back to the retailers to help them produce better forecasts.

In addition to optimizing the supply chain, an extended retail ecosystem, once implemented can reduce systems friction, technical complexity, and improve the cross-channel consumer experience. Integrated systems reduce erroneous, redundant, and unsynchronized data that lead to “garbage-in garbage-out demand forecasts. Web-services based integrated systems also reduce the complexity of the supply network for each participant who can now receive a cohesive picture instead of a collage of fragmented snapshots. Finally, the reduced occurrences of out-of-stock situations that will result will provide a better experience for the consumer who will not be leaving the store empty-handed.

What about BoB? (Best-of-Breed)

One of the articles in the Summer issue of CPO Agenda asks “One tool or a whole toolbox”? Another viewpoint in the never-ending ERP vs. Best-of-Breed debate, it notes that despite the improving functionality of ERP systems, many companies still turn to Best-of-Breed ( Bob ) vendors to meet their procurement and supply chain needs.

The article notes that some ERP-centric organizations, such as committed customer Delta Air Lines which deploys a single company-wide installation of SAP, runs e-Sourcing and spend visibility software from VerticalNet (acquired by BravoSolution, acquired by Jaggaer). The reason, according to Bob Currey, General Manager of Sourcing Information and Supply Management, is that ERP systems are excellent at what they were originally designed for – accounting and transaction processing – but when areas of the business such as the supply function want to extract information from that accounting and transaction data, it can be difficult for them to locate and access the right numbers. In terms of procurement, the information on spend is there alright, but not in a user-friendly format. The ‘canned’ reports don’t meet all our requirements, and custom-developed reports take time and programmer effort. … In any business, programming resources are often at a premium. You can build a business case and wait in line – and then carry on waiting, perhaps indefinitely, for the resources that you need to be made available. Or you can go to a ‘best-of-breed’ vendor, and buy what you need, off the shelf. For us, the time-to-benefit of the VerticalNet solution made a lot of sense.

Of course, as the article points out, from an IT perspective, the ERP solution has obvious merits: better integration, an existing commercial relationship, simpler implementation – and, as the Americans say, “one throat to choke” if something doesn’t work as it should. In contrast, a best-of-breed vendor may offer software that proves troublesome to integrate, might be difficult to deal with, and can lack long-term commercial viability.

So what should you choose?

Both!

After all, even as Simon Pollard, Vice President for Discrete Manufacturing at SAP notes, Although we believe customers much prefer to buy a suite of software built around a single platform, our assumption going forward is that we will cohabit with specialised best-of-breed vendors. We can’t do absolutely everything, and wouldn’t want to.

The reality is that there is no Magic-Bullet One-Size-Fits-All One-Software-Package-Does-All solution for any area of your business — and that we’re probably years, and years, away from getting close. My rationale — the pace of innovation in software is still increasing, indicating that there are still miles and miles to go.

Best-of-breed applications tend to fill niches that the big (ERP) systems will overlook, either because the vendors of the big (ERP) systems will not assign the same importance to them or determine that the cost of offering those solutions does not justify the expected benefits (especially compared to another potential offering). In addition, best-of-breed solutions are often years ahead of their traditional ERP counterparts. And when you consider the double-digit percentage improvements these tools can often have across the board, it just makes sense to augment your traditional enterprise systems with best-of-breed solutions.

Furthermore, now that many of the best-of-breed solutions are delivered on-demand using the software-as-a-service model, you can be up and running almost instantly since on-demand solutions have been found to perform better than traditional installed applications, upgrade easier, and install faster, on average, according to Aberdeen Group’s recent study “The On-Demand Supply Management Benchmark Report: Enterprises Turn to the Web and Find Quicker and Better ROI to Help Achieve Supply Management Goals” (sponsored access was available for a limited time). Furthermore, when enterprises deploying on-demand solutions improve spend under management by 28%, which could lead to additional savings of 1M to 3M above and beyond what you would get without the best-of-breed on-demand tools (see: The On-Demand Supply Management Benchmark Report), the business case becomes overwhelming to at least give it a shot.

And the Software Patent Pirates will Plunder Away …

Recently on Procurement Central [WayBackMachine] Dave Stephens wrote an article about the Software Patent Pirates who plunder patents for storage in their corporate “holds” like hidden weapons. These firms troll the high seas of business in search of easy prey. But unlike real pirates, their actions are completely legal, even if they do leave a bad taste in everyone’s mouth.

And if a few senators have their way, it’s going to get a whole lot easier for the patent pirates to plunder corporate treasuries. As summarized in this CNet article, a new bill, sponsored by Orrin Hatch and Patrick Leahy, called the Patent Reform Act of 2006 has been introduced that proposes a number of changes to the way American patents are awarded and challenged.

Although it has some moderately good points, including a “post-grant opposition” system that would allow outsiders to dispute the validity of a patent before a board of administrative judges within the Patent Office, rather than in the traditional court system, potentially staving off excessive and needless time-consuming and costly litigation, it has some bad points. The worst part of the proposal is that it would shift to a “first to file” method of awarding patents. Whereas now you have to be the first to invent something to be eligible for a patent, if passed, this bill grants eligibility to anyone who is the first to file a patent. In other words, those who can afford to file quickly and often will reap the rewards while real inventors could get the shaft.

More importantly, it could allow patents even more absurd than the one referenced by the Technology Liberation Front in “Yet Another Ridiculous Software Patent”. For example, anyone could start submitting patent applications for minor variations on standard internet protocols that have been around for decades, and be eligible to receive the patent. If the minor variation was useful, it would then be unusable in the public domain, even if completely obvious to a high school computer science student.

As you might have guess, I am also against software patents. If you recall my post on TRIZ in the Purchasing Innovation Series over on e-Sourcing Forum [WayBackMachine], you’ll remember the statistics observed by the followers of Genrich Altshuller who found, like him, that only 4% of patents contained a new concept and only 1% a revolutionary discovery. Furthermore, when it comes to software, I would estimate that the situation is much, much worse. Not only have I never seen a software patent or application therefore that I believe is worth a patent, I have never heard of one either. I’m not saying that there might not be a valid software patent out there, or at least a valid basis for one, but the reality is that the basis of computing, and software, has not changed much in the last fifty years, being based on mathematical fundamentals that are abstract and unpatentable as laws-of-nature. Software patents have avoided this restriction by patenting implementations of “business processes” that are patentable, even if completely obvious.

I just wish politicians were as informed as their peers in the European Parliament in this regard who voted 648 to 14 to quash the Computer Implemented Inventions Directive when it was introduced, maintaining the status quo and preventing software from being patented in Europe.

After all, as Dave Stephens points out, software copyrights insure software isn’t copied, remain in effect for up to 90 years, and still allow you to sue for, and recover, damages in the event you are honest-to-goodness defrauded. It’s good enough for Europe and the publishing industries, why can’t it be good enough for us too?

Customer Data Management

About the same time Aberdeen released “The Spend Intelligence Benchmark Report: Turning Data into Action”, which we discussed last Sunday in There’s No Such Thing as Spend Intelligence, Aberdeen also released “Customer Data Management: How Leaders Attain Tangible ROI” that found more than 85% of survey respondents plan to invest in Customer Data Management solutions within the next 24 months.

Why? Maybe it’s because Aberdeen research reveals use of timely, complete, and accurate information leads to improved customer service levels, reduced operational costs, increased revenues, and higher customer satisfaction and retention rates. In addition above average performers attained >20% annual improvements in these key metrics:

  • Customer retention rates (84%)
  • Data accuracy / match rates (76%)
  • Partner/customer satisfaction rates (68%)
  • Revenues (56%)

Or maybe it’s because good customer data leads to good metrics and good forecasts, and creating the right product at the right time in the right quantity is one of the keys to overall supply chain success. After all, the wrong product results in lost opportunity, an insufficient quantity results in lost sales, and the wrong time results in stale inventories. Moreover, this hurts your customer as well as you, who might leave you for another provider.

Regardless, customer data management is important, and it has a lot in common with the development of a spend intelligence solution, to use Aberdeen’s terminology. Consider the top three challenges identified by the Aberdeen report:

  • Extracting & Normalizing Customer Data Captured from Multiple Sources
  • Verification of Data Accuracy or Completeness
  • Extracting & Normalizing Customer Data Stored in Legacy Data Marts

These are essentially the biggest challenges in implementing a good spend visibility solution

  • Extracting & Normalizing Spend Data Stored in Multiple Systems
  • Verification of Accuracy and Completeness
  • Extracting and Normalizing Legacy Spend Data for Historical and Trend Analysis

Therefore, if you are considering an enhanced spend visibility solution and an improved customer data management solution, you might want to take advantage of the synergies and tackle both projects simultaneously. Chances are, you’ll need to integrating a lot of the same feeds and systems, so you might as well tackle all of your data needs at the same time.