July 30, 2003, 12:00 AM

Supply Chain Management

The web has transformed the supply chain from a manual process into a real-time information system.

Controlling a retail supply chain has historically meant juggling mail, telephone calls and, in the past 15 years, fax transmissions, among headquarters and stores, suppliers and freight carriers, in a complicated and laborious effort aimed at getting the right products delivered to the right stores at the right time. On top of all that, retail managers pored over reams of spreadsheets to figure the best buy and sell pricing to keep the most attractive inventory moving across store shelves.

The web has drastically changed all this into an automated system, and this automation will continue to expand through more sophisticated applications and a wider rollout of web-based systems. Retailers large and small are already benefiting to different degrees from applications ranging from basic browser-based ways of viewing production and delivery schedules, to more sophisticated methods of sharing retail sales and manufacturers’ production data.

Synchronizing data

Regardless of the degree of sophistication in these systems, the goal is the same: capitalizing on real-time visibility in the supply and demand chain to make the flow of production efficient, timely and directly tied to customer demand. Known in the retail industry as collaborative planning, forecasting and replenishment, or CPFR, a name coined by the Voluntary Interindustry Commerce Standards Association, this goal has been promoted for several years as an outgrowth of the drive toward Internet and related strategies technologies.

But to fully realize this goal, retailers and suppliers as a whole will have to first move into a universal system of synchronized product data, experts in supply chain technology say. “CPFR is a great concept, but first you have to fix up your own house,” says Renee Speicher, a retail/wholesale expert for consultants BearingPoint Inc.

Speicher and other industry experts recommend that retailers and suppliers move aggressively into data synchronization, which streamlines, increases the accuracy and supports the automation of product information flowing between supplier and retailer in an increasingly global trading environment. With web-based automated transmission of purchase orders, advanced ship notices and other business documents, retailers and their trading partners rely on less physical entry of data and benefit from fewer mistakes that cost millions of dollars in erroneous invoices as well as lost sales due to having the wrong merchandise on display.

Getting synchronized with data also prepares companies to participate in what’s considered the ultimate form of trading partner collaboration: integrating the back-end systems of a retailer with the back-end systems of trading partners, so that a merchant’s POS data, for example, automatically updates a supplier’s production system. As a result, the retailer gets more appropriate and timely inbound flow of goods, the supplier can focus on the most important production needs while cutting back on less saleable goods, and both can cut costs by keeping smaller levels of inventory.

A bite at a time

There are, of course, many aspects of supply chain collaboration already in the works without completed data synchronization. Retailers are improving their international sourcing of goods with web-based systems that let them share product specifications and order requirements with remotely located suppliers who simply need a browser to participate-a technology that is making it easier for retailers who want to manage the sourcing and production of their own private label products from overseas vendors. And web-based supply chain execution and event management systems enable retailers to quickly respond to changes in the expected flow of goods, such as by requesting suppliers to substitute new materials during early production phases to accommodate changes in demand.

Because setting up new supply chain systems can be costly, experts recommend that retailers concentrate on areas that will generate the quickest return on investment. When moving toward data synchronization, for example, Speicher suggests that retailers first decide which parts of their legacy systems must be updated immediately to make a new supply chain effective, then figure which parts may already be compliant with data integration standards and which would be too costly to upgrade and better left for eventual replacement.

The important thing, she says, is to identify and initiate projects that will improve existing supply chain processes, but not to get discouraged if the first attempts don’t go as smoothly as expected. “If at first it doesn’t work, try it another way,” Speicher says. “If you wait, processes will become more costly and harder to change.”

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