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Stay Competitive Servicing Clients: Get on the Supply Chain Information Grid PDF Print E-mail
Written by Rob Guerriere   
Jun 16, 2009 at 08:41 AM

GXS B2B Scorecard

How to get visibility, common demand metrics, and key performance indicators with SAAS-I-BAK-PEDIA for MJIT.

 

Do you remember the long lines at the grocery store before they began scanning bar codes?  We need a price check on check-out number 6.  Remember?  You needed a check-out strategy.  You eye up the speed of the check-out girl, the size of the carts, how much produce and meat compared to the package goods.  How about getting in line now while Mom grabs the last few items on isle 12?  It was 35 years ago that the first item was scanned. 

It was a pack of Wrigley’s Juicy Fruit chewing gum and it was scanned at Marsh’s supermarket in Troy, Ohio on June 26th, 1974.  The pack of gum is now on display at the Smithsonian Institution’s National Museum of American History.  Also interesting, is that the check out girl who scanned it, Sharon Buchanan, just retired from that same store in 2007. 

 At that time, no one had any idea how much of an impact the bar code was going to make on our lives.  Today, we have another marriage of innovation and technology.   It has to do with a small industry that developed in size and potential with the Internet and has now matured into a foundation block of how business is conducted.

 

Electronic Data Interchange (EDI), has been the format of how business transactions like purchase orders, shipping notices, invoices, and electronic funds transfers, have been transacted for the majority of businesses, particularly in the distribution of a product, for the last 25 years.  With the ubiquity of the Internet, the EDI space was flattened and Internet technology allowed anyone with an email address to do EDI.  EDI networks like GXS, Inovis, Sterling Commerce (AT&T), SPS Commerce, EDS (HP), and nuBridges, operated as an electronic post office, charging postage as a transaction.  But in the later half of this decade, with the onset of software as a service (SaaS), high speed Internet access, cloud computing, data mining, and loads and loads of raw EDI data, the industry woke up to an epiphany and began opening the envelopes.  They quickly realized that the supply chain information on hand, properly sorted and with real-time value, is worth more to the business, to the supply chain partners, to the industry, and the financial and economic community, then the postage that they have been collecting as their revenue model.    As a matter of fact, rather than just sending transactions between trading partners as if they were made of paper, these networks have the ability to give visibility and transparency to multiple layers of the supply chain in a real time environment.  Isn’t that meta-just-in-time (MJIT) manufacturing?  

 

Now if the hairs on the back of your neck are standing reminded by the dot.com dot.bomb era, well yeah, so are mine.  That’s because these same ideas where sold back then, but as vaporware.  Today, they are a reality offered by businesses that are profitable and financially sound.   These services mentioned below are already in use by some of the largest corporations.  Today they are a competitive advantage that have been made available to even the smallest family businesses.  In two years, they will be a business requirement.  Let’s first approach some common supply chain problems and challenges.

 

There are two great pieces that you can read further on today’s supply chain problems and challenges.  The first is an article in the Wall Street Journal that appeared about a month ago.  You can see it here .  It’s title:  Clarity is missing from the Supply Chain by Phred Dvorak.  The second is a well done report titled Best Practices: Demand Management by George Lawrie of Forrester.  You can read the report here.

 

The WSJ article tells the story of how last October when most everyone was watching their 401(k)s get cut in half, Best Buy customers became an endangered species.  The merchandizing executives abandoned their demand algorithms and in the high of the financial system collapse, gave their best guess as to what demand will be in the coming Christmas shopping season.  As they are quoted in the story saying, no one had any guidelines to go by.  They leaned on the safe side by slashing orders so not to get caught with inventory at the expense of a potential loss of future sales.

 

Without any notice or visibility, as the slashed orders were fed down the supply chain, suppliers began to panic and ask themselves how much cash do we have on hand to survive?  Everyone, from one link to several links down the chain, were in disbelief of how fast the spigot turned off.  There was a lot of fear and everyone hit the breaks fast.  No one wanted to be caught with inventory.

 

Phred for the WSJ, tied it to JIT business running blind on fear.  Suppliers lacked the visibility on what was happening at the consumer level, supply partners lacked any common understanding of demand forecast metrics, and they lacked planning and collaboration with their customers.  Subsequently, in the following months, thousands were laid off, inventory sat, and production nearly came to a halt.   The question here is: would transparency of the supply chain have produced different results for its stakeholders?

 

In the Forrester report on demand management, they report that “Firms are relatively slow to adopt new processes and lack the commitment to manage demand at a sufficiently granular level.  Despite years of hype about collaboration and demand-driven supply chains, manufacturers and retailers are still suffering from the same old problem of stock-outs in one location or season and massive markdowns in another.”  They go on to outline that 1) black box forecasters earn users’ distrust and misses vital demand data like promotions and holiday seasons.  2) Only the top 50 CPG firms like Proctor and Gamble and Unilever have the resources to collaborate with retailers to plan demand and forecasting modeling based on location and promotions.  3) Most manufacturers are unable to get timely, by store, point of sale (POS) data.  And if they do get it, they don’t have the bandwidth or processing capability to use the data effectively. 

 

Forrester concludes with four suggested best practices in the areas of collaborative planning, transparent replenishment, common metrics for demand shaping and integration of these practices into sales, operations and inventory planning.

 

So I headed down to stormy Florida the first week of June to the GS1 UConnect conference because I was told that the titans of the EDI world would be there and they had newsworthy answers to these supply chain issues.  I sat next to Sue Brozas from the GS1 on the flight down to Orlando.  She is the one who filled me in on the history of the bar code label.  (on a side note, Continental Airlines scanned my boarding pass bar code right off my iPhone.) She also warned me that attendance was really light this year; almost as scarce as those Best Buy customers.  Well, it was a bit depressing due to the low attendance but that gave me extra time with the EDI executives. 

 

I got down to Orlando and begin hearing the regular use of some terms that are  new to me.  They are BI (business intelligence), AI (actionable intelligence), OI (operational intelligence), and KPIs (key performance indicators).  These terms were always used together with SaaS (software as a service).   And many times this key performance intelligence that is actionable in a business for operations is all fed by raw EDI data and offered in a software as a service environment.  Wow, so what we have here is SAAS-I-BAK-PEDIA.

What the heck is it?

 

SPS Commerce is the largest EDI network group that focuses on connecting small and mid-size suppliers to every major retailer in North America.  Eric Chaffee, the Director of Product Management explained to me that their supplier clients have online access to a sortable database of weekly and sometimes daily customer point of sale data by store location and SKU.  This information is collected and managed by SPS Commerce on behalf of the supplier client.  The client has a dashboard view of the information and can drill down and sort the data online without needing to qualify for the Excel Spreadsheet Olympics.  This gives the supplier visibility into the movement of their products by store, and can use this information to identify trends and issues that before was entirely unavailable.   This is one example of real time business intelligence.

 

Edifice is one company that focuses entirely on getting real-time POS data in a usable format for suppliers.  One case study presentation at the UConnect conference was retailer Dick’s Sporting Goods.  Barrett Raabe from Dick’s explained how he uses Edifice’s service to provide POS data reports and dashboard views to 80% of his supplier business.  Barrett went on to extol the benefits that Dick’s was receiving including better managed inventory, less missed sales opportunities and quick fixes at stores that may not have put products on display.  My only issue with Dick’s approach is with pushing a proprietary format and vendor on their supplier base at a standards conference.  However, Steve Cornwell, VP of Marketing and Product Management, Edifice, explained that the standard that Dick’s was using fell short of giving suppliers the timely picture on a store by store basis.  The Edifice solution can pull an additional 25 key metrics that are not in the EDI standards for an 852 document today.  Steve also continued on how his business is exploding with growth recently.  I see the benefits and I like the useful data layouts but I still think that Dick’s will have to standardize the data for other clients who are on different EDI networks.

 

Inovis, one of the big three EDI networks, purchased a business intelligence company back in 2007 called BetweenMarkets.  Their product is termed Actionable Intelligence and is used in a variety of formats and reports on both the buyer and seller side.  I spoke with Michael Hatton, Product Manager of the Actionable Intelligence service.  Michael spoke about the importance of having all of the raw EDI data that is transacted with your trading partners rather than filtered and manipulated within one’s ERP system.    Using raw EDI data gives you the big picture of your trading community for scorecard purposes, and allows you to compare suppliers or customers based on the_same_common_data.  This information can be further shared as an aggregate number to the community to allow supplier to see how they rank.  Again, this is offered as a service.  Inovis manages the data and supports the software and servers.  Users have profile access depending on their department and can only see data that affects one’s group.  A company’s IT group does not need to manage the system.  One of Inovis’ clients who has become a case study based on their use of Actionable Intelligence for supplier scorecard and EDI on-boarding is Big Lots the closeout retail chain.

 

nuBridges, another cutting edge but smaller EDI network, just announced at the conference the purchase of a business intelligence company out of Portland Or.  I got to visit with Rob Humphrey, Head of National Sales, who filled me in on their TradeSmart product.  He added that one important part of business intelligence is taking the translation of EDI data to a new business level.  By using and programming certain business metrics into a wide view of your trading community you can not only identify EDI business rule errors before they reach your customer or supplier but you can also get reports that help mitigate against chargebacks for EDI errors.  This is particulary helpful on the advance ship notice (ASN) and customer invoice deductions.   By having these reporting capabilities it assists in managing your company’s customer service.  It allows you to drill down and identify issue in a real-time mode.  nuBridges hosts and manages the data for you.  They can further help you set key performance indicators (KPIs) to provide an independent view of how each of your departments perform and how your customers rate your performance. 

 

 EDS, an HP company, has long been looking in the envelope, explains Asghar Seyed, VP Client Solutions.  Most trading partners understand the importance of demand transparency and collaboration.  He has seen how clients sharing data and common metrics have lead to increase sales to the end consumer and that is a win-win for the entire supply chain. 

 

GXS, the industry’s largest EDI network and a company that was born out of two division spin-offs, one from GE and the other from IBM, has branded their service as Operational Intelligence (OI).  I got to visit with Bobby Patrick, SVP and Chief Marketing Officer, Andrea Brody, VP of Global Product Management, and Pradheep Sampath, Director of Global Product Management.  They touched on how clients like Panasonic, Electrolux, Yamaha, Yanmar and Lowes have been using OI to rate and scorecard their international carriers on on-time store ready shipments.  BB&T Bank uses OI to collect historical transaction history to assess risk when buying accounts receivables from clients.  GXS is now adding trend analysis to OI to help companies identify demand and sales opportunities within their trading partner community.    Pradheep further explained to me, “the OI solution is a B2B extension of the business intelligence offered by ERP companies like SAP, JDA, i2, RedPrairie, and Manhattan Associates.  OI offers shared KPIs between buyer and seller which allows them to hang their hat on common metrics, demand forecasts, and data accuracy like advance ship notices, which leads to a shared definition of success.”

 

This is a major shift of how business is being transacted.   Over the last ten years, the Internet and email has done away with paper processing.  Now EDI transaction networks have evolved to a supply chain information grid.  Major retailers and distributors are opening up visibility into their supply chain and looking for collaboration on demand metrics and KPIs with their supplier base. 

If I was a supplier in this rapidly changing landscape, I would want to be the first to collaborate and better service my customer and the end consumer by utilizing the supply chain information grid.  If you don’t, your competitors will and two years from now, it will be a business requirement.

 

So for your next meeting or conference call, ask Bob, your COO, why your company is not doing SAAS-I-BAK-PEDIA for MJIT and see if he is on top of the market trends.  And let me know what he says.  Send me an email or place your comment for public view below.  And pleeeessse, the next time you're in your neighborhood Wegmans, Shop Rite, Harris Teeter, Publix, Krogers, Rich Foods, Safeway, HEB, Shaws, Bashas, Costco, Meijers, Giant Eagle, Loblaws, Sobeys, or Walmart, take a moment to appreciate the efficiencies gained at the check-out by that 35 year old bar code.


Bar Code turns 35 years old
 

Solution Providers mentioned in this article:

 

Edifice

EDS

GXS

Inovis

nuBridges

SPS

 

*Scorecard Image above provided by GXS.

 

 


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Last Updated ( Mar 05, 2010 at 09:46 AM )

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