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Retail Vendor Performance Management News Round Up for October, 2017


New RSR Benchmark Report on Supply Chain Execution; Straight Talk (Finally) from Retailers on RFID; Was 2017 the Inflection Point in Managing Vendor Variability
?

Oct 20, 2017

by SCDigest Editorial Staff


RSR Benchmark Report on Supply Chain Execution


The analysts at Retail Systems Research are out with their latest benchmark report on Supply Chain Execution.


Highlights of the research include:

 

• The effect Amazon has had on other retailers is profound. Retail winners believe one of their best chances to compete is by using any stores they have in a more meaningful way - as both a way to fulfill orders and to process returns.

Supply Chain Digest Says...

2017 may go down as the year retailers started to look seriously at reducing supply chain variability driven by vendor performance.

When it comes to opportunities, retail winners look to add same-day delivery capabilities, and are open to adding more local distribution centers for forward-positioned inventory to help make that happen. Under-performers see the same opportunity, but from a very different perspective; they want to reduce inventory investments without impacting sales - an unrealistic goal, RSR says.

Before building the business case for significant changes to the supply chain, most retailers want to address the issue of inventory visibility and accuracy. ROI is not relevant.

The number of retailers that have achieved "a lot of visibility" has significantly improved even from the 2015 supply chain benchmark. RSR notes that inventory visibility enables other supply chain improvements, and the best performers are already using it as a competitive wedge to further separate themselves from average and under-performers.

However, even given that last point retailers don't have a high level of trust in their metrics. As seen in the chart below from the report, for example, only a little more than half of retailers have high levels of confidence in key supply chain related metrics such as inventory levels at the store and the DC. Only slightly more than one-third have a high level of confidence in predicted DC inventory levels.



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There was surprisingly little focus on working with vendors in the report, but that said here are a few data points.

50% of retail winners have a high level of concern vendors will go direct to consumer faster than they can, versus just 15% of all other respondents.

In terms of opportunities for improving supply chain execution, better collaboration with trading partners was well down the list, cited by about 20% of respondents as being in the top three. Adding more local distribution centers topped the list.


The full benchmark report is available for free at the RSR web site with registration.

Straight Talk on RFID from Retail Panel

Since Walmart announced its ultimately failed RFID mandate back in 2003, it has been generally been difficult to get straight talk about the technology and its adoption due to much hype from the RFID system vendor community - and in some cases adopters of the technology themselves.

So it was refreshing to see research firm the Platt Retail Institute conduct a very balanced interview with three retailers who were very realistic about RFID adoption, benefits and challenges.

Here are some highlights:

Karl Bracken, senior vice president, supply chain transformation, Target, said that while the company's goal is to eventually tag all SKUs and categories, the reality, Bracken said, is that for Target the RFID ROI is different across product categories, of which Target has many.

It is still difficult to read tags on say bottles of water and certain electronics products, Bracken said, while a category such as cosmetics - which has inventory accuracy issues - is nevertheless challenged due to tag placement issues and difficulty reading many RFID tags in a small area.

Consistent reductions in tag and reader costs is helping ROI in more categories, Bracken said, adding that RFID ROI in retail can be challenging because it often depends on estimates of increases sales from more accurate inventory counts, especially when stores implement ecommerce efulfillment from stores.

Rene Saroukhanoff, senior director of in global merchandise planning, reporting & analytics at Levi Strauss, noted that getting results in-store pilots is much different than making that happen across hundreds of stores.

"There are impacts to business process. There's employee training. Any time you're touching store operations, it becomes a bit of a big deal,” Saroukhanoff added.

Allan Smith, former CIO at retailer Lululemon, interestingly noted that the benefits from moving RFID further upstream from the store is more challenged than you might think.

"When we started establishing priorities, we found that what really causes the inaccuracy at the end of the day is the human touch points with product. In the store is where that happens the most. As you move up the supply chain, there are fewer touches to your individual products. It's more case and pallet level,” Smith observed - meaning the ROI is harder to find.

It should be mentioned that any vendor RFID tagging program must be supported by a compliance management process in just the same way the bar code labeling has been monitored by many retailers for years. There are many ways there can be issues with vendor tagged merchandise, which often result in costly retagging at the DC or store. Compliance Networks is ready to work with retailers on vendor RFID compliance.

The Value of Reducing Vendor Variability

2017 may go down as the year retailers started to look seriously at reducing supply chain variability driven by vendor performance, with Walmart and Target both announcing major initiatives in this area.

More on this soon from the Retail Vendor Performance Management Bulletin - and of course vendor compliance is at the core of such programs.


Your Comments/Feedback

Srihari

Senior Consultant, Infosys
Posted on: May, 22 2016
Great article. I am a little suprised not to see BNSF in the mix while I understand their financial mode/operation is a little different. 

That would only give a complete perspective with all the players in the pool.

Mike O'Brien

Senior editor, Access Intelligence
Posted on: May, 26 2016
Surprised to see Home Depot fall off the list; thought they were winning with Sync?

Julie Leonard

Marketing Director, Inovity
Posted on: Jun, 27 2016
Using the right tool for the right job has always been a best practice and one of the reasons, we feel, that RFID has never taken off in the DC as exponentially as pundits have been forecasting since 2006. While these results may seem surprising to those solely focused on barcode scanning, the adoption of multi-modal technologies in the DC makes perfect sense for greater worker efficiency and productivity.

Carsten Baumann

Strategic Alliance Manager, Schneider Electric
Posted on: Aug, 19 2016

The IoT Platform in this year's (2016) Hype Cycle is on the ascending side, entering the "Peak of Inflated Expectation" area. How does this compare to the IoT positions of the previous years, which have already peaked in 2015? Isn't this contradicting in itself?

Editor's Note: 

You are right, Internet of Things (IoT) was at the top of the Garter new technology hype curve not long ago. As you noted, however, this time the placement was for “IoT Platforms,” a category of software tools from a good number of vendors to manage connectivity, data communications and more with IoT-enabled devices in the field.

So, this is different fro IoT generally, though a company deploying connected things obviously needs some kind of platform – hoe grown or acquired – to manage those functions.

Why IoT generically is not on the curve this year I wondered myself.

 

 

Jo Ann Tudtud-Navalta

Materials Management Manager, Chong Hua Hospital, Cebu City, Philippines
Posted on: Aug, 21 2016

I agree totally with Mr. Schneider.

I have always lived by "put it in writing" all my work life.  I am a firm believer of the many benefits of putting everything in writing and I try to teach it to as many people as I can.

This "putting in writing" can also be used for almost anything else.  Here are some general benefits (only some) of "putting in writing":

1. Everything is better understood between parties involved.  There are lots of people types who need something visual to improve their understanding.
2. Everyone can read to review and correct anything misunderstood.  This will ensure that all parties concerned confirm the details of the agreements as correct.  This is further enhanced by having all parties involved sign off on a hard copy or confirm via reply email.
3. Everything has a proof.  Not to belittle the element of trust among parties involved, it is always safest to have tangible proof of what was agreed on.
4. There will be a document to refer to at any time by any one who needs clarification.
5. The documentation can be useful historical data for any future endeavor.  It provides inputs for better decisions on related situations in the future.
6. This can also be compiled and used to teach future new team members.  "Learn from the past" it is said.

There are many more benefits.  Mr. Schneider is very correct about his call to "put it in writing".





Sandy Montalbano

Consultant, Reshoring Initiative
Posted on: Aug, 24 2016
U.S. companies are reshoring and foreign companies are investing in U.S. locations to be in close proximity to the U.S. market for customer responsiveness, flexibility, quality control, and for the positive branding of "Made in USA".

Reshoring including FDI balanced offshoring in 2015 as it did in 2014. In comparison, in 2000-2007 the U.S. lost net about 200,000 manufacturing jobs per year to offshoring. That is huge progress to celebrate!

The Reshoring Initiative Can Help. In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the nonprofit Reshoring Initiative's free Total Cost of Ownership Estimator can help corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.org/TCO_Estimator.cfm

Robert

Transportation Manager, N/A
Posted on: Aug, 30 2016
 Good article!  I am sending this to my colleagues who work with me.  We have to keep this in mind.  Thanks!

Ian Jansen

Mr, NHLS
Posted on: Sep, 14 2016
SCM is all about getting the order delivered to the Customer on date/ time requested because happy Customers = Revenue. Using the right tools to do the right job is important and SCM is heavily dependent on sophisticated ERP systems to get right real data info ASP.

I've worked in a DC with more than 400,000 line items and measured the Productivity of Pickers by how many "picks" per day.

I've learned that one doesn't have to remind Germany about your EDI orders.

Don Benson

Partner, Warehouse Coach
Posted on: Sep, 15 2016
Challenge - to build and sustain effective relationships at the level of the organizations that are responsible for effectively coordinating and colaborating in an otherwise highly competitive environment 

Jade

Admin, Fulfillment Logistics UK Ltd
Posted on: Oct, 02 2016
Of course we all need to up our game. We need to move with the times, and always be one step ahead of what the future will bring.

Mike Dargis

President of asset-based carrier based in the Midwest, Zip Xpress Inc. (at ZipXpress.net)
Posted on: Oct, 03 2016
Thanks for the article, but I know there's a lot more to this issue than just the pay rates. Please check out my blogs on the subject at www.zipxpress.net.

Blaine

Inventory Specialist, Syncron
Posted on: Nov, 16 2016
Lora, great article! I agree that companies choose the 'safe' solution more often than not. My solution is a bolt-on for legacy ERP's and we even face challeneges of customer adoption. Most like to play it safe and choose an ERP upgrade, which is more costly, time consuming, and has lower ROI across the board. Would love to learn more about your company, we are always looking for partnerships.

Blaine
blaine.schultz@syncron.com

Bob McIntyre

National Account Executive, DBK Concepts LLC
Posted on: Nov, 21 2016
This is a game changer in GE's production and prototyping.  It also has huge implications across the GE global supply chain with regard to the management of their support and spare parts network. 

Kai Furmans

Professor, KIT
Posted on: May, 22 2017
I am referencing to the comment that leasing of warehousing equipment (beyond forklift trucks) is a vision for 2030.
Just recently in Europe, such a business model has started, see here: https://next-intralogistics.de/

I am following with a lot of interest, how the business develops.

Stuart Rosenberg

Supply Chain Consultant, First Choice Supply Chain
Posted on: Jun, 05 2017
If we limit the standard on judging or determining the best supply chain to just three calculations it does not tell the entire picture.  Financial performance metrics are valuable as they capture the economic consequences of business decisions.  But supply chain managers make decsions and use organizational resources that impact a company's financial well being.  Where is a firm's earnings over a period of time determined by sales less product costs and general/adminsitrative costs?  Where is the metric for determining the sources and uses of cash from three perspectives - operational, investment and financial?  Where are these supply chain metrics: on-time delivery, lead time, response time to customers, product returns, procurement costs, network distance, inventory carrying costs, forecasting accuracy, sourcing time, etc,.  Without knowing the results of all these supply chain calculations the there must be a question as to the accuracy of the 25 top supply chains.

Dustin Calitz

Project Commercialization Manager, Mondelez
Posted on: Jun, 06 2017
I feel this ranking misses the mark in SC. It does not seem to consider a key indicator in days inventory on hand, which is key to determining a SC company's ability to forecast, manage inventory costs and reduce aged stock. In additiion I realize it's difficult to understand what goes into the customer survey, but would I assume specific metrics are being asked. For examples customer's opinion on service level differentiation and the ability to deliver the right product on time, which should then be allocated a bigger weighting than 10%. It would also be interesting to take a view of the above list's SKU portfolio complexity, seasonality and launches/promotions. I would again assume some companies on the list above have a far more complex SC to manage and lead, ultimately requiring a lot more innovation within a SC to stay ahead of competitors, and ultimately satisfy their customers demands.  I understand above metrics are difficult to measure, as mentioned in the article, but they somehow need to be considered to give a true reflection. 

Michael Hurd

Lean Consultant, Unemployed
Posted on: Jun, 10 2017

A Very Good Article...

While some feel that lean is a scam that pushes for more out of the personnel and out of the companies through reduction of waste and adding value for the customer, there are several things to remember:

1) Lean methodologies are designed and implemented to reduce time wasting, so this may seem that you are working harder as an employee.

2) Lean methdoligies only work when everyone from the janitor to the owner of the company get involved and back the program.

3) Lean methods are there to make you work smarter not harder, although it may feel you are working harder.

4) YES... Sometimes lean methodologies fail! This is due to project overun or taking on too large a problem and trying to fix it all in one go and not taking the smaller problems that are associated with the large problem and fixing them first. Sometimes fixing the small problems leads to resolution of the larger problem.

Akhil

Director Supply Chain , skuchain
Posted on: Jul, 31 2017
The Supply Chain technology is not considered a problem because traditionally supply chains are thought to be cost centres unlike sales functions. The tendency, in general, to limit expenses and cost cutting on upgrades for technology and for talent have been hindering progress for the businesses. Supply chains lack real time visbility and above all trust across the value chain (not that the participants are dishonest) rather it's about the cascading effects referred to as the bull-whip effect which causes higher magnitudes of disruptions. 

Supply chain real time information should top the list .

Another problem is that of multi homing as so much data is available across several feeds of IOT/Email/Internet /Mobility/ERP that organisations tend to have issues around finding a single platform to collate them for meaning analysis. 

Blockchain (if deployed appropriately) can be a great solution for solving the issues around the supply chain.

Mike Ledyard

Vested Program Faculty, Vested Way / University ofTennessee
Posted on: Aug, 04 2017
Excellent article.  It very much points to the need for Shared Risk / Shared Reward as we teach at Vested.  Suppliers will respond when they are made part of the team, and they have a lot to bring to the game.  The service provider is the subject matter expert in the services provided, and in an excellent position to enhance the capabilities and services offered by the shipper.

Andrew Downard

Managing Director, AD Supply Chain Group Pty Ltd
Posted on: Aug, 05 2017
As the article points out it is not a lack of technology that is holding back performance but rather a failure to form the right sort of relationships.  As well as the length of such relatiohships, practitioners should consider employing arrangements that incentivise both parties to innovate and deliver levels of performance and profit that neither thought possible.  By far the best model I have come across to achieve this is the Vested Outsourcing model developed by researchers from the University of Tennessee.  See www.vestedway.com for information on the model and case studies that show how others have benefited from creating a Vested deal.

Najma

logistics, threelineshipping
Posted on: Aug, 23 2017
Very informational article. The major focus of logistics is on e-commerce. There is a need to optimize every component of logistics by following the latest trends and technologies. Thanks for uploading this article.

Sameer Shukkla

Consulting Partner, Wipro Inc.
Posted on: Sep, 17 2017
I have recently co-authored a white paper with my colleague wherein we have looked at 2 fundamental guiding principles  -

1. Always have enough to Sell / Produce
2. Do not have excess to Sell / Produce

These 2 Golden Rules can be the foundation of keeping optimal inventory levels and for organizations to achieve the same. We have looked at a framework which tries to reduce the phase mismatch between Demand & Supply, and tries to bring the shape of the supply curve closer to shape of the demand curve.

We have classified symptoms and underlying root causes for the above "Phase mismatch" and "Curve Mismatch" between Demand and Supply, and then talked about addresssing those individual root causes to strive towards Leaner Inventory levels while maintaining or improving service levels.

So to answer your question, we feel the Companies which have addresed these causes have been able to keep DIO horizontal or even going down, while others have not been able to control rising DIO because of not addressing the root causes.

Simon Eagle

SCM Consultant, Camelot MC
Posted on: Sep, 17 2017
You ask why turns are flat or declining despite lots of attention and technology. The answer is, I think, 2 fold: the supply chain environments VUCA (Volatliity, Uncertainty, Complexity, Ambiguity) is on a continuous upward curve and this means that forecast accuracy inevitably declines in parallel - and much of that inaccuracy is hidden by the statistics. For instance a company with, seemingy good, 80% mix accuracy will find that figure is skewed so high by the few high volume / low variability items. 80% of the items will be achieving considerably less than 60% error.

So most item level forecasts used for driving replenishment through an MPS (be it ERP or APS) are simply leading to unbalanced stocks, service threats and continuous expediting / fire-fighting. These schedule interrutions are "variability" that is disrupting flow and, thereby, increasing lead-times, using unplanned capacity and generating excessive (and still unbalanced) inventories.

The replacement in ex-stock supply chains is "enterprise(s)-wide" pull which also uses "push" for extreme/exceptional events. Its other key characteristics are that the supply chain is decoupled and is demand-driven. And now it can be implemented using SAP since they announced they they have co-developed an enhancement for IBP that supports this transformational way of working - up to 50% inventory reduction, requiring less capacity and shorter lead-times all while achieving planned service levels. See https://www.camelot-itlab.com/en/camelot-demand-driven-lean-planning-suite-for-sap/ and https://www.linkedin.com/pulse/supply-chain-flow-what-why-how-simon-eagle/


John Smith

Research & Development, Octopus Tech Solutions
Posted on: Sep, 18 2017
IoT is without a doubt starting to become a major factor in the profitability of various companies. In the manufacturing sector, we will see it come into the front by the end of 2020 completely. Various sectors have already adapted IoT solutions like the security industry or companies offering BPO Services India. Contact centers not just in India and China but across the world have adapted technology following the principles of IoT. The manufacturing sector is soon going to follow.

Girish Maniyar

Chief Manager Development Initiatives, Asian Paints
Posted on: Sep, 28 2017
I  can speak with some context. While efficiency and tools can reduce inventory, we also see the number of SKUs and new products increasing, and also the number of sales/depot points. This means the inventory in such cases, can start with very high number and with more customization and choices available to the consumer, so there is no end to the long tail of products available within a category. It is unlikely that the slow/dead goods are written off so easily to be not included here.

A larger question, would it be purely an IO problem or also a Demand Planning (Forecast Error) problem? A higher cycle time of service but a better fill rate can improve inventory performance, by aggregation. But a bad forecast can do away all the good work you do in inventory planning.

Do you have numbers for decorative coatings in the list? I did not see something there only for decorative coatings.



 
 
 
 
 

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