Supply Chain Matters will be mobile next week, traveling to Orlando to attend the FOCUS 2015 conference on Monday and Tuesday, sponsored by JDA Software.
This conference brings together upwards of up to 2000 professionals to share best practices across multiple supply chains, learn about new technology and network with fellow supply chain focused peers.
This year’s conference will have a special emphasis on the needs to support Omni-channel customer fulfillment needs. In aggregate, 18 of the conference sessions will have an Omni-channel focused theme. That will include a spotlight and report of progress on JDA’s Retail Me assortment and pricing application, a software-as-a-service and consulting offering, unveiled at the NRF Show in January. There will be unveiling of new capabilities to the JDA Intelligent Fulfillment and Transportation portfolios, including more granular, warehouse aware item definitions to improve load building, support for dynamic shipment splitting and prioritization, as well as other enhancements to integrated fleet and transportation management. JDA will further announce this year’s winners of its annual JDA Real Results Awards in various categories.
This author recently conducted a JDA Software sponsored webcast: Supply Chain Segmentation- The Key to More Predictable and Profitable Business Outcomes. (Now available on-demand at the JDA Software web site) I will be available at next week’s conference to speak to attendees and their teams regarding specific questions related to this topic.
Stay tuned to Supply Chain Matters for upcoming FOCUS updates. If you will be attending this year’s event, do seek us out, say hello and share your impressions of supply chain accomplishments and challenges.
Disclosure: JDA Software is one of other sponsors of the Supply Chain Matters© blog.
As a broad based supply chain community, we often context and plan supply chain transformation initiatives under the three-pronged perspectives of People, Process and Technology enablers. I would urge transformation teams to seriously consider a fourth component, that being Information, including the velocity, context and clarity of information. While some may be of the mistaken belief that the element of Information is solely the perspective of IT, it is rather a jointly-owned, cross-functional element of transformation.
On the Kinaxis 21st Century Supply Chain blog, Executive Editor Bob Ferrari has penned a guest posting, Supply Chain Transformation-The Important Element of Information Strategy.
Enjoy and comment.
Survey of Retail and CPG CEO’s Reflects Today’s Realities of Higher Costs Associated With Online Customer Fulfillment
A new joint study of senior retail and CPG industry CEO’s conducted by PwC under the sponsorship of JDA Software confirms what many in our supply chain community have believed; the increasing profitability challenges being brought about by the higher costs associated to today’s online customer fulfillment demands.
This study, The Omni Channel Fulfillment Imperative, reinforces that an enormous amount of money, energy and time is being spent by retailers and consumer goods manufacturers to improve their Omni-channel fulfillment capabilities. While this may not be surprising given the current business environment, the report reveals an unexpected and disturbing fact: only 16 percent of companies openly indicate that they can fulfill Omni-channel demand profitably.
The survey itself included a reported 410 retail and consumer goods companies from eight different countries. The authors included some CPG company’s views in order to gain perspectives from both ends of the customer fulfillment supply chain, along with the reality that may CPG firms have increased their direct online fulfillment presence. Nearly 51 percent of responses were reportedly weighted toward the classification of top 250-1000 retailers, while 22 percent represented the top 250 retailers.
Supply Chain Matters had the opportunity to speak with Wayne Usie, Senior Vice President of Retail Industry at JDA Software about this study and its messages. Usie aptly pointed out that most retailers remain optimistic for top line revenue growth, they are acknowledging that their firms originally designed their supply chains around the bulk movement of goods from suppliers, through distribution centers and eventually to stores and consumers. Today’s business demands of Omni-channel and online customer fulfillment require a far different set of capabilities. The other important insight is that in their original design that emphasized distribution center centric flows, retail supply chains can often mask the true source of customer channel demand. That has a significant influence on how to plan and efficiently position inventory associated with today’s Omni-channel dynamics.
From our lens, other important perspectives brought forward by this study was the indication by 71 percent of CEO’s polled that Omni-channel fulfillment was a top priority for retail business. Keep in mind that merchandising and sales strategies have often been top priorities for retail businesses. This different perspective, we believe, is the new reality of online and Omni-channel reflecting that the fulfillment supply chain has become an important focus.
Other profound findings were the indication that 67 percent of CEO’s believe that the cost to fulfill orders across channels is increasing, and that 88 percent (a near total consensus) cited transportation and logistics as a fulfillment capability that needs the most attention. Supply Chain Matters believes that this is a reflection of the continued high costs trending of free or same-day shipping that is impacting retail supply chains, especially those with lower product margins. Much of the survey data reflects the threats brought about by global online retailers such as Amazon, Wal-Mart. The major global package carrier’s increase in rates and the shift to dimensional-based freight pricing this year has not helped and probably added even more concerns and needs for alternative methods.
Question 9 of this survey queered on likely internal challenges likely to occur over the next 12 months. Indications were remarkably equally balanced and also from our lens, point to many supply chain related implications including inventory management, effectively integrating physical stores with online business models and failing to consistently meet customer expectations across all channels. Reflecting on such a listing, we believe that the data is yet another revealing indication that not all customers can have the same fulfillment service-level dimensions, hence the need for more discernable supply chain segmentation strategies, aligned to expected customer service and business profitability needs.
The complete PwC Survey as well as a summary infographic can be accessed at this web link. (some registration information required). A further perspective of the survey can be garnered in a posting authored by Wayne Usie on JDA’s Supply Chain Nation blog.
Supply Chain Matters will reflect more on the effects of Omni-channel retail in our live coverage of the upcoming JDA FOCUS 2015 conference occurring later this month.
Disclosure: JDA Software is a Lead sponsor of the Supply Chain Matters blog and a client of its parent, The Ferrari Consulting and Research Group LLC.
The term Predictive Commerce has been brought forward in the context of connecting up and downstream, Omni-channel product demand sensing with an integrated, single-model, end-to-end supply chain planning and execution. In some sense, it can be viewed as an enhanced iteration of demand-driven supply chain response capability for complex distribution and long-tail product demand environments. Supply Chain Matters is of the view that this capability warrants further consideration by supply chain and sales and operations planning (S&OP) teams, in the context of a transformative effort requiring careful thought and investment.
Predictive Commerce was most recently brought forward in a recent published white paper from supply chain planning technology provider ToolsGroup, titled Predictive Commerce: Helping Companies Return to Growth.
This paper defines such capability as:
“Predictive Commerce is a strategy that enables this shift (in planning methodologies) and revolutionizes the way companies think, see and plan their end-to-end supply chain. It connects supply chain strategy, planning and execution into an end-to-end planning process. The key technology enabler is a single underlying model”
This paper describes examples of predictive commerce applications that include real-time product demand sensing linked to dynamic replenishment processes. The example brought forward is a large coffee shop brand, namely Costa Express, leveraging machine telemetry feeds from 3000 self-dispensing coffee machines to trigger coffee bean, cups and flavored syrup replenishment needs among supporting distribution replenishment centers. In another retail industry example, product demand sensing is linked to dynamic replenishment and product segmentation to minimize last mile delivery costs by utilizing existing channel inventories. A further example is connecting product demand sensing and predictive orders with the needs for transportation capacity and optimization.
We concur and re-iterate that the most important takeaway for industry supply chain teams to ponder is that Predictive Commerce or other similar type capabilities that fuse supply chain planning and execution in a single information model require a transformative strategy that brings together such capabilities. This is particularly important in an environment where legacy applications or ERP backbone systems were implemented under the notions of planning and execution being two separate hierarchical processes and data sets that fed different information streams back and forth. Today’s Omni-channel and online fulfillment demand streams are far more concentrated in SKU level and location specific planning and execution dimensions. That implies a single data model with far more granular data and information streams as well as requirements to plan inventory investments at multiple tiers of the supply chain.
The good news is that advanced information technology now available in today’s marketspace can provide such capabilities in a less disruptive manner. A single data model approach opens far more enhanced capabilities in leveraging analytics and deeper supply-chain wide intelligence. It further paves the way for the ability to leverage more predictive and prescriptive planning methods for supporting near real-time customer fulfillment execution requirements.
In addition to technology, there are important people and business process elements to consider in such a transformation. Business processes, whether internal or externally focused, need to be well understood by all participants and have an “outside-in” perspective. Deep collaboration among customers and suppliers is essential. Do not neglect the change management and skills impact for people in managing an overall supply chain environment. Especially those that are driven by complex by faster-moving, exception-driven events vs. day-to-day sequential business processes.
Predictive Commerce can indeed be a meaningful competitive differentiating capability for distribution and online fulfillment sensitive supply chains. Such a capability requires a transformative strategy, often aligned with supply chain segmentation. It is indeed a “crawl-walk-run strategy anchored in people, process and advanced technology.
© 2015 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters® blog. All rights reserved.
Disclosure: ToolsGroup is a current client of Supply Chain Matters ® parent, the Ferrari Consulting and Research Group LLC.
There is some noteworthy supply chain technology news this week which we wanted to call attention to Supply Chain Matters readers.
LLamasoft Acquisition of IBM’s LogicTools Supply Chain Business Unit
Supply chain network design provider LLamasoft announced this week that this provider had acquired IBM’s LogicTools supply chain applications business unit, including rights to LogicNet Plus, Inventory and Product Flow Analyst and Transportation Analyst.
There is somewhat of a history to LogicTools and this provider’s associated product suite. The company was originally founded by MIT Professor Dr. David-Simchi Levi as a result of his work in supply chain optimization. As an industry analyst, I first encountered LogicTools and its emphasis on supply chain network design mapping and analysis in the 1999-2000 period. The company was then acquired by France based ILOG in April of 2007, where the plan was to assimilate LogicTools applications among other ILOG technology. Professor Levi became a member of ILOG’s management team for a period of time. The essence of LogicTools and associated applications were then a part of IBM’s acquisition of ILOG in 2009. Since that time, it would appear that the strategy and focus of supply chain network design within the much broader IBM Smarter Commerce strategy lost attention and focus.
According to the announcement, LLamasoft will immediately assume software maintenance, support and services to all existing LogicTools customers. A Customer FAQ document available on the LLamasoft web site indicates that customers with standard IBM contracts will be assigned immediately while other contracts with legal restrictions will have a sub-contracting relationship. LLamasoft indicates it will rename the LogicTools applications after the closing of the transaction.
Our initial Supply Chain Matters view of this announcement notes that current LLamasoft design applications include a lot of design functionality support, and thus this deal may well be one more related to customer acquisition, ongoing support and opportunities to up-sell existing LogicTools customers with broader LLamasoft applications coverage.
This author is reaching out to LLamasoft management and we will have further perspective in a future commentary.
FusionOps Secures Additional Funding
Supply chain cloud-based analytics provider FusionOps recently announced the raising of an additional $12 million in Series B financing led by Enterprise Associates and participation from Series A investors. The latest investment brings total investment within this analytics provider to $19 million since its founding. According to the announcement, this additional financing will be applied to accelerate development and global expansion.
This provider was founded in 2000 as iSpring, developing and marketing supply chain collaboration tools and was re-branded to the FusionOps in 2005 with a focus on supply chain analytics. Current named customers include Brocade, Columbia Sportswear, Merck, Mahindra, among others. The product offering includes a proprietary multi-tenant cloud-based business intelligence stack with expertise in supply chain performance attributes. Supply Chain Matters initially brought reader attention to FusionOps in a July 2012 commentary as a business intelligence alternative for specific SAP environments particularly for mid-market firms.
Noteworthy within this latest funding announcement are separate announcements indicating support for other application backbone environments, namely Oracle Enterprise Business Suite and Salesforce.com. In the case of Oracle, analytics support is extended to procurement, sales operations, inventory and production planning intelligence needs. In the case of Salesforce, a new application launched on the Salesforce AppExchange plans to provide sales teams with infographics and analytics related to customer transactional history related to customer inventory, order and service-level fulfillment.
By our observation, this latest round of funding and associated announcements implies a strategy shift reflecting diversification beyond SAP installed base customer analytics needs. This may set the stage for broader strategic options down the road.
Earlier this week, this author had the pleasure of delivering a JDA Software sponsored webcast titled: Supply Chain Segmentation- The Key to More Predictable and Profitable Business Outcomes. We have since received positive feedback regarding the content.
- Industry supply chains increasingly cannot support one-size fits-all supply chain fulfillment
- Supply chain segmentation continues to garner increased interest and multi-industry deployment
- This is a transformative level strategy and needs to be approached in this context
- Advanced technology is an ever more important key enabler
- Consider more predictive and prescriptive planning capabilities within your strategy framework
In the one-hour webinar, I provide grounding perspectives for today’s industry and business environments, convergence of technology trends, as well as insights on analytics focused strategies. I further provide a more succinct definition of supply chain segmentation and address the various process components to this strategy.
Among the key takeaways for supply chain segmentation teams were:
- Segmentation strategy has to be grounded in detailed analysis and intelligent on the entire value-chain.
- Consider the need for the process to be oriented toward externally focused, predictive and responsive capabilities focused on expected business outcomes in contribution margin, service levels and other key metrics as well as the velocity, clarity and context of information needed for more timely decision making.
- Focus on smarter data strategies when considering analytics in this process.
- Do not neglect the all-important skills impact that segmentation requires.
There is certainly much more and JDA Software has graciously made this webcast available on-demand, for viewing at your convenience. The webcast is available by accessing this web link and providing some basic registration information.
If your organization is considering a supply chain segmentation strategy or if your current efforts in this area are in need of a re-look, I believe you will gain some insightful learning within the webcast.
Bob Ferrari, Founder and Executive Editor
Disclosure: JDA Software is one of other sponsors of the Supply Chain Matters blog.