We frequently think of retail in terms of merchandising, but these days the supply side is just as interesting, whether it's product design or collaboration with suppliers for transportation, forecasting, or financial optimization.
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Gone are the days of the hands-off retailer who has no involvement in the supply chain. Buyers may still stalk their sources for unique merchandise, but today, that is just the beginning of the road they travel: through product design, sourcing, delivery, and financing the supply side. Today’s retailers, in their quest for competitiveness, are private labeling, and therefore, manufacturing their own products; many are also more deeply involved with their brand partners, requiring visibility in operations throughout the product’s life—from design through delivery. Supply chain platforms have emerged that provide higher-order solutions to support the complexity involved in managing these integrated and more collaborative processes.
Supply-side Collaboration and Platforms for Retail
During the last decade, the underlying technology to support collaboration has evolved quite a lot. That’s great. But what is even more interesting is that collaboration and applications are now linking up supply chains in new ways. Retailers and suppliers have pretty complex relationships, and they are getting even more so with the mix of brands and private label products and the processes required to support them. Retailers may not all use the same processes to manage their supply chains, so the platform has to make it easy to support a greater variety of relationships, process nuances, and data.
Decades have gone into the foundational work such as bar-coding, EDI and data standards, forecasting and replenishment, and have resulted in the mass adoption of some consistency in methods and data. Once you have a foundation, your organization can move up the value curve. Examples being pursued by retailers and brand companies include collaborative management of product lifecycles, Omni-channel, home delivery, end-to-end visibility, better differentiated merchandise, improved sourcing and spend analytics, leveraging POS data in the back of the chain, pricing analytics, supply chain optimization, and RFID for reducing out of stocks; as well as more collaborative funding and payment processes. The leading retailers are pursuing multiple fronts, whereas some smaller organizations may pick one or two critical areas to focus on.
Here are interesting examples of what can be done:
When we did our retailer RFID research earlier this year, retailers declared that source tagging would be a real boon to the industry, not just for the retailer, but across the chain. Low-cost suppliers are loath to put in any technology, so they are noncompliant on ASNs, what to say of RFID. But a platform like ComponentSoft’s can deal with even the lowest level of labor processes and use simple tagging at the source to automate a huge array of subsequent processes from ASNs to accurate inbound and cross docking, and ease the process of receiving and merchandising in the store. (We will cover more of this solution in the next issue). I recently went to ComponentSoft’s demo center in Massachusetts and saw this in action.
Poor sample management/sample tracking is also a huge issue in the product lifecycle, slowing down time to market. In fact, buyers and design teams have long desired a solution for this problem. ComponentSoft’s Item Sight/Sample Management module addresses this challenge to ensure that manufacturers, designers, and retailers all have visibility.
People do not often equate PTC with retailers. But at their recent conference, over 75 of PTC’s retail customers had a standing room only track that included the who’s who in retail talking about their PLM processes. Tremendous research and planning go into each product, and retailers have a mega problem due to the sheer number of products they usually offer. One interesting example I saw was First Insight’s use of PTC’s Windchill FlexPLM product. First Insight explained that the challenge is not just product design, but investing, because private label retailers own the whole process from design, sourcing, supply chain, and sales through a product’s end of life.
First Insight provides consumer-level data to help retailers incorporate consumers’ tastes into new product designs. By using the PTC platform, the design elements as well as the financial side of new products can also be explored: What do various options cost? What might be the best place to source, based not only on the cost of supply and manufacturing, but other factors such as currency, taxes, and duties? That is, what is the total sourcing cost? From a brand perspective, what is the right buy quantity? How can I improve (speed up) the evaluation cycle for assortments and where to allocate them? Which markets may gain the best sales and margins?
GT Nexus has a unique capability in linking retailers and suppliers and also has an enviable retailer customer roster. For example, at GT Nexus’ recent conference, I listened to Dee Slater, COO of Wolverine, describe their restructuring. Wolverine went from being a part of Payless to being their own company, acquiring a few other footwear companies (such as Saucony, Keds, and Hush Puppies)1 along the way. Ms. Slater stated that when they consolidated the newly merged company, GT Nexus’ applications were the only common thread across the companies. Some used the trade financial services, some used procurement, and some used the transportation solution.
Previously, retailers lined up as either transportation/logistic execs using the transportation components of GT Nexus, or merchants/financial professionals using the trade funding components. But with the creation of a single platform, more customers are seeing the power of having not only a holistic view of the business, but taking advantage of the suppliers on the network—and vice versa.
The Descartes Global Logistics Network has about 190K members including suppliers, carriers, and retailers who can share data and expertise in the Descartes Community.2 Supporting advanced collaborative processes such as inbound consolidation for retailers (so they can reduce transportation costs and manage the huge task of receiving), or at the other extreme, supporting merchandising applications on the ground in the retailers’ settings, Descartes is unique in their global presence. Yet they keep the focus on transportation processes—from multi-tiered suppliers to the end-markets (home or business). (You can read Always On in this issue about Descartes’ success in delivery services.)
Logility is a more traditional model—conceptually—and a pioneer in collaborative forecasting. However, we rarely see retail planning and manufacturing planning on the same platform.3 In recognition that the distinctions between retail and manufacturing may often not exist—that is, manufacturers sell to the end-consumer and retailers have private label—these enterprises need mechanizing, forecasting, and supply chain, for example. Another roster of brand manufacturers gone retail, Logility's retail customer base engages, generally, in broader use of their Voyager platform4 where their various planning modules are fully integrated. In addition, by supporting a range of collaborative processes from forecasting, lifecycle planning, and S&OP, to supply-side and Multi-Echelon Inventory planning, Logility’s end-to-end analytics can manage planning processes from the manufacturer to the retailer.
These are just a few examples of what is going on now as companies become a lot smarter about how they manage their processes and utilize information to become market leaders. They provide an indication of how advanced a company must become in order to participate in collaborative or networked platforms and take advantage of what they have to offer. These platforms are not just for large retailers, so no excuses. Many of the brands and companies we talked to from Ci Jeans in Brazil, Fender, David’s Bridal, Caribou, and others engaged in technology innovation on the way up and often attributed their success to technology innovation and collaboration. The only thing required to improve performance is zeal. Once the foundation and the basics are put in place, the collaboration road can take you to significantly better relationships based on strategic value and tangible benefits.