At enVista we believe there are four fundamental types of supply chains: Distribution, Manufacturing, Purchasing and Service Centric. A vertically integrated CPG company would be classified as a hybrid of three different supply chains (Manufacturing, Purchasing and Distribution) compared to a retailer who is (Purchasing and Distribution centric). At the end of the day and regardless of which type of supply chain your company is your supply chain is required to meet or exceed the end customer’s expectations while maintaining profitability. Supply Chains are becoming more complex, they are dynamic in nature due to economic pressures and require agility in order to be competitive. There is an increasing interdependence on technology, processes and people. The Supply Chain Eco-System is ever evolving, and what has worked in the past is no guarantee for future success. Technology solutions used to manage the above supply chains vary vastly based upon the business objectives of the company. A pure-e-commerce retailer has different software requirements compared to manufacturer of cell phones.
Historically, Supply Chain practitioners have had to use: 1) enterprise resource planning (ERP), 2) best of breed (BOB) or 3) legacy or home grown solutions to manage and execute their supply chains. Over the last decade many companies have used a combination of BOB applications with their ERP system. Or in the case of some retailers they have used a culmination of BOB and legacy solutions for merchandising, replenishment, allocations, financials, and distribution to manage their business.
Many of the ERP software vendors have tried to develop end to end solutions but have struggled in the area of optimization and execution. To overcome the functionality gaps in their core solution they have made acquisitions to fill in the holes. On the other hand non-ERP providers who have focused on execution and optimization have made acquisitions to overcome their inability to plan and become the transaction of “record”; single data model for the enterprise.
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These software companies have either built or acquired a “suite” of solutions that may or may not be integrated but more importantly do not work on a common data model with shared business objects. The extreme is a software vendor that has made numerous acquisitions or has developed solutions on different technology stacks that are not integrated but may have “assembled” their solutions with a common user interface to look like a “suite” but the underpinning solutions are not integrated and do not share data between applications in order to form basic optimization.
Imagine for a second that you are a Sr. Supply Chain Officer and there is complete transparency from source to consumption. Your organization is completely aligned based upon business objectives and desired outcomes that have been developed by your Executives. Your team acts and behaves knowing the decision and actions they make impact either 1) customer service, 2) top line revenue, and/or 3) profitability. Unfortunately in many retail environments or complex supply chain environment resources make decisions in a vacuum not knowing REAL time the impact their decisions may have on the supply chain upstream and down-stream.
For example a merchant/buyer decides to bring in product early because of potential spike in demand (forecasted snow storm), they decide to expedite the freight and the only supplier that has the desired inventory can ship on Friday meaning the warehouse will have to work on Saturday and deliver to the store during the weekend. Sounds great in theory but what is the costs and service impact of making that decision. What happens if the snow storm does not hit as predicted what is the impact of the extra inventory, space in the warehouse and expedited transportation cost? But on the other hand the snow storm does hit and the buyer was right, did the buyer know the impact on his or her margins and the cost to serve prior to making the decision. I doubt it. How about if the platform architecture used SOAP and WSDL to allow for easy integration to other applications, widgets, and programming languages and informed the buyers of the snow storm proactively because the demand planning and replenishment system was tied to the National Weather Bureau.
This leads to why I believe having a universal technology “transparent platform” to run a supply chain where-by there is complete transparency is key to improving supply chain performance in 2010 and beyond. There is one version of the truth from source to consumption. Having a platform is more than just visibility and alerts, which are historical in nature. I am referring to multiple applications that reside on a single platform that can be used for optimization and predictive what if analysis. In the case of my previous example, if there was a single platform sharing the same data model and with common business objects then the buyer could prior to issuing the PO to the ski supplier understand the impact on his or her decision.
What if I execute one PO and expedite the freight by having the vendor drop ship to a few stores, versus shipping to the DC. What if I ship to the stores on Monday vs. Saturday, what is the impact to my sale through rate on the item and transportation cost. My point is that this is impossible without a single platform that is synchronized from source to consumption. The buyer could have completely eroded his margins on the item because the merchandise had to be air freighted from the east coast to west coast.
The trend for 2010 and beyond is for supply chain centric software technology firms to develop their solutions on a single “transparent platform” which runs on one technology stack with one data model. Supply Chain Planning and Execution centric software vendors are adopting integrated work flow and user personalization (defined roles) with common business objects. Meaning there is only one item master, purchase order, and sales order. This minimizes master data integrity issues and ensures that ALL supply chain management personnel are using the same data. Data integrity is key when trying to develop multiple reports, dashboards or queries across an organizations enterprise and supply chain. Having common business objects that are shared across applications is mission critical to drive the lowest total cost of ownership. In addition common business objects are shared between applications (functionality) allowing for either simultaneous optimization or common work flow. An example would be optimizing purchase order consolidation for an inbound load plan and sharing that consolidation with the WMS.
Having one PO table within the data base that is used by both the WMS and TMS with shared business objects allows for improved work flow through out a company’s supply chain. Last but not least a platform allows for transparency and drives accountability within the end user community. For example a vendor is going to be late with a shipment based upon the initial requested must arrive by date (MABB), an alert is sent to the buyer, replenishment team, inbound receiving team and transportation team providing each with visibility to react to the alert but more importantly allowing the applications to re-plan automatically. This could mean sourcing the product from the other vendor or expediting the freight and knowing the costs impact in advance.
The new splash and buzz is about getting on one “transparent platform.” Technology has matured to allow for a common work flow layers, business objects layers, optimization layers, web services layers and business intelligence (management reporting) layers. Supply chain are not getting simpler to manage they are getting more complex. The future is about cross-functional awareness and organizational accountability through a “Transparent Technology Platform” which reduces the complexity and simplifies decision making and execution.
Is this a dream or reality? I encourage any solution provider: Manhattan Associates, Red Prairie, High Jump, Microsoft, JDA, I2, SAP, or Oracle to come forward with their plans to move from traditional suites and assembly architecture to what I predict will be a revolutionary “Transparent Technology Platform.”
Always in Motion,