June 26, 2008, 12:00 AM

Supply Chain Management

Managing the flow of goods in a complex global market

Supply chain technology has come a long way in recent years in its ability to help retailers source goods and manage their flow into distribution centers and stores. Retailers that effectively take advantage of this technology and related business processes maximize their ability to satisfy customers with the right products while maintaining the most efficient flow of inventory and contractual relationships with suppliers.

“Best-in-class companies continuously manage their inventory throughout their supply chain to improve customer service levels, forecast accuracies and perfect order metrics,” says Nari Viswanathan, research director, supply chain management and logistics, at research and advisory firm Aberdeen Group Inc., a unit of Harte-Hanks Co., in the March 2008 report, “Technology Strategies for Closed Loop Inventory Management.”

In a second report released in March, “Supply Chain Innovator’s Technology Footprint 2008,” Viswanathan notes that 80% of 805 surveyed companies, including retailers and consumer goods manufacturers, were transforming their domestic or international supply chains. Best-in-class companies, the report says, keep total logistics costs to 5% of sales, turn their inventory 28 times per year and ship 96% of orders in full on the customer’s requested schedule.

Rising expectations

That’s not to say that running efficient supply chains and inventory management systems is getting easy. Consumers are increasing their expectations of access to preferred products across all shopping channels-online, store or contact center; financial pressures are increasingly forcing retailers to cut costs and improve profit margins; and global competition and market development are pushing retailers to source products from a greater number of suppliers in more distant markets.

Indeed, Viswanathan has found that retailers and other types of companies cited rising supply chain costs, followed by pressures to improve return on investment and improve customer service levels, as the top forces driving more efficient inventory management. “Examining the key pressures that companies are facing with respect to inventory management, we see that the corporate need to improve return in invested capital, rising supply chain costs and the pressure to improve service levels are acting simultaneously and creating the need for balancing these three mutually exclusive business pressures,” he says.

To address these challenges, retailers have access to an expanding base of supply chain management technology. It covers the broad spectrum of finding suppliers and sourcing products, managing contracts and monitoring manufacturing and labor policies with distant suppliers, managing cross-border tariffs and customs requirements, collaborating with suppliers to match production with planned product rollouts, and getting visibility into inflow of goods and managing any interruptions.

The evolution of web-based systems, meanwhile, is presenting retailers with more options for deploying supply chain technology applications. With more common use of web hosting, and of XML and other web-enabled integration technologies, vendors are offering more applications-either on-premise or hosted and available on-demand-for managing supply chain and inventory systems.

Finding the right mix

Some applications provide visibility into the movement of goods at multiple points between supplier and buyer, with a few of those incorporating radio frequency identification to track package movements, while others provide enterprise integration from front-end order management and processing of purchase orders on up through the supply chain for collaboration with suppliers to better match demand with production.

Retailers who figure the right mix of supply chain technology for their operations can improve their performance in getting the right products to the right destinations at the right time.

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