An ongoing challenge for many strategic sourcing and procurement selection teams is coming up with an objective process for weighting the alternatives for pressing business process change with technology choice options.  The challenge often comes down to the options for selecting additional available functionality in a resident ERP system, the good enough option, or selecting a best-of-breed vendor offering.  To that end, we want to alert our Supply Chain Matters readers to a newly research document produced by our research arm, The Ferrari Consulting and Research Group, which I have personally authored.

The title of the document is: When it Comes to ERP Systems- Is Good Enough’ – Good Enough? and this document is now available for free download in our Supply Chain Matters Research Center. We only request that you provide basic contact information. After you provide contact information, an email will be sent that contains the web link for downloading the document. Please note that it is a Supply Chain Matters policy to not sell access to our email distribution listings nor subject your email address to a constant blasting of promotional emails until you have no choice but to scream and unsubscribe.

In this research, I uncover the challenges occurring among technology selection teams in balancing the needs for more responsive and cost effective business and supply chain management processes with those of balancing the needs for IT efficiency and utilization of resources.  The paper provides teams with some helpful methodology along with aides and templates for the objective weighting of business process requirements and IT system selection criteria that can aide in the evaluation process.

If your organization is either thinking of investing in advanced sourcing and procurement technology or is currently bogged-down in the overall selection process, we believe that you will find the content and methodologies provided to be very helpful.

As always, after reading and adsorbing the content, we encourage your feedback, viewpoints as well as your experiences regarding the challenge of weighting ERP vs. best-of-breed choices.

Bob Ferrari

The following commentary can also be viewed and commented on the Supply Chain Expert Community web site.

There is a developing story that should capture community reading interest because of its supply chain related learning.

General Motors Photo

One of the current day business news headlines concerns the General Motors developed Chevrolet Volt, the company’s premiere entry into the plug-in hybrid automobile market. The Volt has been highly touted as the future of automotive technology, and aggressive production, marketing and sales goals have been established for 2012. The vehicle currently comes with a rather pricey sticker price, namely $41,000, and GM believes that the innovative features of the futurist car will overcome price concerns.

After some months of initial sales, The National Highway Traffic Safety Administration (NHTSA) in its initial testing of the Volt has discovered instances of battery related fires.  Three NHTSA crash tests caused the car’s batteries to catch fire days or weeks after the test, a somewhat unusual occurrence.  While GM is still investigating root cause, suspicion points to a battery cooling system which may have been damaged as a result of the crashes.  GM has been quick and proactive to respond to this situation, has placed retail sales on-hold pending further investigation and has offered concerned owners options for either a free loaner car or the opportunity to return the vehicle.  GM however indicates that it remains highly confident of the safety and ultimate consumer acceptance of the Volt, and on resolving the current issues.

There is also a broader supply chain voice perspective to this story, one from which senior executives and cross-functional supply chain teams may benefit.

In late August, Bloomberg BusinessWeek featured an article; General Motors CEO Dan Akerson is Not a Car Guy.  We had cited this article in previous Supply Chain Matters commentary. The article itself reflects on GM’s newly appointed CEO, his lack of direct automotive industry experience, and more importantly his mission to change years of previous in-bred management culture at GM.  With the help of a hefty U.S. government financial subsidy and massive re-organization plan, GM is transforming itself to a leaner company.  Thousands of jobs have been shed and the survivors are being asked to be much more productive, agile and out-of-the-box thinkers. The article provides one management perspective quote from Akerson: “It’s not my role to make people comfortable. I don’t know what it was like five years ago, and really I don’t care. We are in a war.”

The article, however unintended, perhaps provides us another perspective relative to the current Volt situation. It cites a December 2010 management meeting when the Volt product development team had developed its plan to initially build 45,000 Volts, and assumed that the plan was “baked and ready to go”. Akerson instead challenged the team to come up with a plan to build 120,000 units, under the assumption that someone informed him (perhaps from sales and marketing) that a vehicle needs to sell at least 100,000 units to be successful.  Volt engineering and product development teams however were keenly aware that it took Toyota and its Prius model about seven years to hit the numbers that Akerson was requesting.  The other looming implication was that contracted suppliers would have to quickly nearly triple the volume of the vehicle’s high tech parts, especially its volume supply of lithium-ion batteries.

While readers can take in the rest of the story, we jump ahead to note that the final decision was to set a build plan for 60,000 units, one-third more than the originally recommended plan, but half the Akerson unconstrained challenge plan of 120,000.

A recent Wall Street Journal article  (paid subscription or free metered view) reflects on the current Volt situation before the fires.   The article also notes that supply was especially short through July, when only 550 of 2600 interested dealers had a Volt to show off to customers. Toward  the article’s  end, there are comments from GM legend and former Vice Chairman Bob Lutz, the originator of the Volt concept design.  Lutz notes that the car’s main problem is the high expectations it faces, and that this year’s build plan was far  too ambitious and the ramp-up was just too slow. Mr. Lutz affirmed his belief in the success of the Volt and described its ultimate success in  baseball analogy  as a “bases-loaded home run “. While we certainly do not profess to know all of the facts and details surrounding the Volt’s product plans and can only speculate what is being written, there is some learning surrounding this evolving story.

The point of view of Supply Chain Matters is that CEO’s and senior management have every right to challenge the status quo and encourage innovative thinking.  That stated, there is also the notion that operational and supply chain experience provides a basis of some understanding of what may be realistic plans, given various realities of ramp-up planning, volume production and testing.  Readers may also recall that other hybrids such as the Prius have experienced other problems along the way, such as braking, engine stalling and software issues, which were all overcome.  After all, this is new technology.

The most innovative design or coolest product can only succeed when all the links in the supply chain operate together, and, when appropriate, the voice and experience of supply chain should trump the needs for bravado.

Bob Ferrari

The following is a Supply Chain Matters guest commentary contributed by Arun Kumar P., a Principal Consultant at Infosys Limited, who is also a contributor to the Infosys Supply Chain Management Blog and consulting team.

The past few years have seen the increasing adoption of buy-online-pick-up-from-store initiatives at several grocery retailers in the United States. What began as a value-differentiating concept in a commoditized industry is more than just an idea today. However, if online grocery is to evolve into a broad-based business model with an alignment of capabilities, maturity of processes, and adoption of technologies, much more needs to be done. The consumer-facing front-end must borrow from leading e-commerce practices while the back-end fulfillment model must evolve by adapting warehousing best practices.

Cheerleaders of the online grocery business model point to its success in Europe and argue for its expansion by delivering orders to homes. Critics contend that this model cannot be effective in the US. Both miss the broader picture.

While it is true that Europe has taken the lead in enabling online grocery shopping where population density also allows home delivery, the keys to the successful adoption of online grocery are located elsewhere. Lost in these debates is the comprehensive understanding of linkages across the true view of consumer desires, alignment of retail grocers, and perspective of solution providers. Therein, I believe, lies the true platform for success.

True View of Consumer Desires

The first step in the journey towards online grocery commerce is to understand the consumer view. Why does she/he prefer online grocery shopping, and what are overall consumerexpectations? The answer, simply put, is that online grocery shopping translates into a time-saving method of fulfilling a domestic requirement that is not only repetitive but is also driven by set buying patterns. The consumer desires that the shopping experience mimics real-life. For instance:

• Retain the ability to search and compare items before adding them to the cart
• Expecting that the retailer to be sensitive to the varied storage, packing and handling requirements (e.g., maintaining chilled, frozen and ambient conditions; separating seafood from cleaning liquids, etc.)
• Access to the latest pricing and promotion campaigns
• With some items, the consumer  may prefer flexibility to order in one unit and pay in another (order bananas by dozen or lobsters by item, but pay by pound for both)
• Support for customization and enhancement (icing for birthday cakes and suggestions of themed cutlery)
• Convenience of picking items from the store at the time of choosing

Alignment of Retail Grocers

Retail grocers must move away from a ‘figure as we go’ approach when it comes to defining a comprehensive online strategy. A common refrain from retail grocers that I have heard is ‘we embarked on an online journey because our competition was doing the same’ or ‘my competitor has a pilot project going and so will I’.

A better approach is to first acknowledge and align with the consumer view listed above and then articulate the strategy. An execution plan across the elements of people, process and technology can follow.

People Element

Successful order fulfillment can be enabled through better workforce management and enabling existing store associates to pick customer orders during low traffic (morning) hours. Over time, these associates gain an insight into consumer preferences, enabling them to make ‘smart’ substitutions and offer suitable choices to store shoppers when asked for help. This is a vivid example of online grocery enablement facilitating cross-sell and upsell transactions with store shoppers.

Process Element

Detailing of process elements is beyond the scope of this blog. However, it must be highlighted that all business processes must be geared towards creating a unique online buying experience for the consumer. And the order fulfillment process within a store must combine the best practices of order orchestration, pick planning, item picking, item substitution, catch weight handling, order staging, and payment processing activities.

Technology Element

The right approach to technology requires an assessment of the current landscape within the enterprise and an analysis of solution options. Retailers are flexible on the former, but are skeptical of the latter – and rightly so – as we will see next.

Perspective of Solution Providers

Retailers desire innovative solutions that articulate business value. Surprisingly, product vendors still seem to lack the required perspective while extending their solutions to online grocers. Classifying solutions as ‘web capture’, ‘OMS’ and ‘WMS’ during customer interactions is the first mistake. It forces vendors to charge license fees for functionalities that will not be used. After all, when was the last time a grocer wanted a real-time count of lettuce on the store front? Product vendors must realize that standard definitions cease to apply when a process flow encompasses activities as diverse as order capture, order orchestration, and order fulfillment. A modular solution with powerful integration capabilities may just be the answer.

For now, it may be in the retailers’ best interest to consider a hybrid approach – the use of the package solution to meet a significant portion of needs, complemented by custom offerings from third party-integrators. WMS-lite anyone? Or SaaS?

To conclude, there is no doubt that online grocery is here to stay. It offers convenience, enhances loyalty, and deepens consumer connect. For retail grocers, deriving an online strategy from the consumer’s view and aligning the operational and technology dimensions is not only a viable differentiator, but the right platform for sustained success.

Please Note: Infosys Limited is one of other named sponsors for the Supply Chain Matters blog.