May 28, 2003, 12:00 AM

Sears and Michelin get rolling with exchange-based collaboration

After a year of practicing supply chain collaboration through the GlobalNetXchange with tire manufacturer Michelin, Sears has boosted sales and profit margins while increasing products in stores and reducing inventory in distribution centers.

After a year of practicing supply chain collaboration through the GlobalNetXchange with tire manufacturer Michelin, Sears, Roebuck and Co. has boosted sales and profit margins while increasing products in stores and reducing inventory in distribution centers. It has already begun similar projects with Goodyear and Sumitomo and is planning to start several more. “We see opportunities to do this throughout the automotive products market,” says Hank Steerman, senior manager for supply chain.

Although Sears could have loaded its own supply chain collaboration software onto its own servers to share information with Michelin, it chose to go with a hosted application from GNX to avoid the cost of installing and maintaining its own software, Steerman says.

GNX also helped to get things rolling, he adds. “No one had ever done collaboration with tires before,” says Nick Miller, director of supply chain services for GNX. “We sat down with them to identify and work out processes.”

Sears and Michelin exchange their information through a supply chain collaboration system from Manugistics Group Inc. that GNX hosts on its web servers. Sears sends data on weekly sales and sales forecasts while Michelin sends inventory and production schedules.

The GNX-hosted Manugistics system analyzes these data for any inconsistencies between supply and demand-such as if Michelin is showing production of a particular product below the demand forecast by Sears-and sends automated e-mail alerts to each company when discrepancies arise.

Last fall, Sears acted on an automated alert to get Michelin to speed up production of an all-weather tire to overcome what would have been a shortfall of 8,000 tires for an advertised promotion. Without the system’s ability to quickly reveal a problem, Sears probably wouldn’t have realized there was a production shortfall soon enough to get Michelin to act, Steerman says. “The sooner we can react the better,” he says.

The system also allows Sears and Michelin to directly view the data through a browser to check how supplies are matching demand forecasts. Steerman says this is particularly helpful to see how well sales forecasts of hot products, such as tires for SUVs, are matching up with inventory flows.

Sears has improved its profit margins on Michelin tires, increased its instore-fill rates and decreased inventory at distribution centers as well as in Michelin’s warehouses, Steerman says. “Having products in stock when customers are in the store means we sell more and at higher prices,” he says. If we have a sale, the customer expects to see that merchandise, or we could lose that customer forever.”

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