Supplier Integration

Walmart….I know it is almost universally recognized as a dirty word for the many challenges they create for their DSD suppliers.  However, today I would like to talk about the beneficial changes to operations that have resulted from their ASN initiative.

Let’s first look at how many “traditional” DSD vendors handled their order flow before ASN’s (I am going to state the implied assumption of pre-sold orders rather than peddle sales here, but really ASN is conceptually impossible without pre-sales).

1. Order is received by vendor “X” hours or days in advance of required delivery (the method of entry is for another discussion at a later date) into route accounting software.
2. Order goes through some level of processing to determine how it will be built.  Eg. Products are aggregated with common packages, or order is built specifically for customer (read my previous blog on whether to build by order or not).
3. Pallet(s) are built by the distribution warehouse staff with paper pick tickets / load sheets.  Possibly with, but more likely without checking of pallet content.
4. Driver shows up the following morning and verifies his load content and has to either manually pick additional product to replace short picks / miss-picks, or if they are lucky gets some help from the receiving staff.
5. Driver delivers goods to store where additional invoice/delivery adjustments may be required due to earlier verification issues.

This process obviously has some fairly inefficient steps here, but I think it is safe to say this was generally accepted, and even still is today with many small to medium sized distributors.

The Walmart ASN initiative continues to roll out across North America.  To be compliant DSD suppliers not only have to pick at a rate of near constant perfection, but they also have to submit this information well in advance of the driver showing up at the back door with product.  Meeting these requirements means manual picking processes have to go away and any pick discrepancies must be accounted for AND communicated in advance of delivery.   This means adding a step to update pick quantities and another step to update delivery handhelds have to above process.  It doesn’t take a rocket scientist (no offence to the rocket scientists), to figure out the changes required to complete these tasks cost $$.  But let’s look at how these operational changes provide benefit beyond being able to continue to supply Walmart with product.

1. Productivity Metrics:  by using either a handheld or mobile computer solution you should be able to track more data than just updated pick quantities.  Why not select a solution to track picking time to generate productivity numbers?  These metrics could be used for incentive picker compensation or alternative motivation plans.
2. Driver Check Out:  with loads already reflecting the changes to pick quantities driver checkout processes should take far less time, getting them out into the trade faster.
3. Delivery Time Reduction:  similar to point above, with accurate load/invoice information route drivers reduce time required to handle the administration side of mobile sales, and should be able to spend more time actually servicing stops.
4. Risk of Fraud:  unfortunately fraud happens…but with accurate order/invoice numbers the need for invoice adjustment will theoretically go to zero.  While I doubt the zero adjustment goal will be present 100% of time, far fewer invoice adjustments means those that happen need better explanation and can be investigated to confirm legitimacy.
5. Route Reconciliation:  here is yet another spot where accurate orders result in time savings.  The lack of invoice adjustments, and accurate inventory numbers save labor for route drivers and reconciliation clerks alike.
6. Inventory Accuracy:  actual pick quantities rather than relieving inventory based on expected numbers give your operation and sales teams real on hand data to know what needs to be ordered, and what is available to sell.

As you can see there are definite benefits to implementing a process solution where actual picked quantities are efficiently tracked.  To truly reap the benefits of this process though, operations should be applying this supply chain improvement not only to their Walmart ASN accounts but to all (or at least the majority) of their accounts!

Traditional perceived challenges to dealing with Walmart aside, I think this is one area where the supplier integration changes they have created in the DSD supply chain best practices are actually forcing operations to become more efficient!  I hope that you consider some of the points above and how they could help your direct store delivery operations as well.
 

I recently received a direct mail marketing piece from a HighJump Software competitor. The mailer included a press release announcing that this company had “enhanced direct store delivery integration” and a one page datasheet which described a direct store delivery value chain as manufacturing + regional warehouse + mobile resources + retail shelf.

HighJump Software is the North American market leader for direct store delivery software solutions. If our primary competitor in the warehouse management systems market had encroached on our market position I needed to know. Perhaps they had acquired a route accounting solutions provider or acquired a provider of mobility solutions for mobile selling and delivery at the retail location. I consulted a trusted industry analyst who confirmed my suspicions… this was marketing hype and this company’s approach to direct store delivery still had significant “holes.”

Anyone familiar with the value chain of direct store delivery companies knows there are some specific complexities that must be addressed in order to have “comprehensive coverage across the extended supply chain.” Here are some things companies should consider when search for direct store delivery software solutions:

Certified Route Accounting Systems

Route Account Systems are unique software systems to manage the complexities of route-based sales and delivery. They typically manage the entire order-to-cash cycle and are geared toward the world where sales, inventory, and business metrics are all tied to a “route.” Although traditional ERP systems can be used for route accounting systems, they typically require customization to deal with complex pricing/promotion, cash settlement, truck inventory, and supplier e-commerce integration. To further understand the complexities in the beverage value chain read It is Hard for Anheuser-Busch to be Procter and Gamble.

Mobile Sales and Delivery Applications

Success or failure in a direct store delivery business is determined at the store shelf. Direct store delivery companies have large workforces of mobile sales and delivery professionals who need to be equipped with mobility technology for them to effectively accomplish their objectives. HighJump Software provides a comprehensive suite of mobility products which support industry best practices for order capture, goal-based selling, delivery tracking and cash settlement. For more details on these solutions read about our latest mobility suite product release HighJump Software Enhances Mobility Solutions With New Release of Mobile Route Sales and Delivery Software Suite.

Load Optimization

Optimized loading of side bay beverage trucks can be complex. While there are numerous packages for creating optimized load plans of traditional van trailers or flatbed trailers, optimizing for side bay beverage trucks is another animal. Additionally, this business problem becomes even more complex when you have a “peddle” environment (driver selling off truck without pre-sold orders) and driver preferences must be taken into account at the load and pallet level.

I think the moral of the story is “don’t believe the hype.” Direct store delivery software solutions are specialized for the unique needs of this industry. Direct store delivery software solutions deal with complexities of supplier integration, cash settlement and truck inventory. A WMS, TMS and retail workforce solution will not meet the needs of most food and beverage distributors in their direct store delivery operations.

Today HighJump announced that our latest route accounting system (RAS) has received certification with Anheuser-Busch InBev for use by their wholesalers. The result of this certification is that HighJump RouteCenter receives the highest level of compliance, Level 1 ISV – Strategic Partner. The news release: HighJump Software Named Strategic Partner by Anheuser-Busch InBev.

The role of route accounting systems in Anhueser-Busch InBev’s value chain is critical. In order to fully understand the importance of this software, it is important to contrast the value chain of the large four beverage suppliers from a traditional CPG value chain. Let’s explore the differences …

Traditional CPG Value Chain

The traditional CPG value chain is largely vertical. A vertical value chain is one where each component of the chain including source, make, deliver and sell is controlled by the same company – in this case the brand owner. This allows retailers and brand owners to collaborate about every aspect of the product including quality, new product introduction, price, promotions, and electronic commerce. With today’s sophisticated supply chain software it is possible for most CPG companies and retailers to know exactly what was sold (and at what price) at every retail location every day.

Additionally, most traditional CPG companies have the following inventory flow: manufacturing/production -> regional distribution center -> retailer’s distribution center -> retailer. In this scenario the retailer is primarily responsible for managing the inventory that is shipped from the manufacturer to the retail distribution center (ordering) and the flow from retail distribution center to store (although there are certainly evolving collaboration techniques to share this responsibility across the manufacture and retailer).

Big Beverage Value Chain

The value chain of the big 4 US beverage suppliers (AB InBev, MillerCoors, PepsiCo and Coca-Cola) are more fragmented than the traditional CPG companies. In the case of the beer suppliers, they manage the manufacturing/production process and then resell their beer to independent wholesalers/distributors that distribute and sell to the retail location. In the case of the large soft drink suppliers, they do not even manage the production process but leave make, deliver, and sell to independent bottlers.

Additionally, in most situations beer and soft drink products are delivered directly to the retail location and by-pass retail distribution. This approach benefits the retailer because they are not forced to handle and transport beverage products which are significantly heavier than most food products. The beverage companies benefit from the ability to merchandise themselves and manage promotions at a local level.

Why Retailer Collaboration is More Challenging in the Beverage Value Chain

Retailer collaboration through e-commerce initiatives is more complex in the beverage value chain. This is because unlike the traditional CPG chain which has full visibility to transactions with the retailer, the big 4 beverage suppliers are reliant on their independent distributors who transact with retailers. AB InBev needs to have the same level of visibility over their independent wholesalers as Proctor and Gamble has over its distribution centers….no easy task.

How the Route Accounting System Helps

The route accounting system is the core back office system for independent beverage distributors (think ERP for beverage distributors). Best-of-breed route accounting systems have certified integration back to the large beverage supplier organizations. Through this integration, the large beverage suppliers are able to have transaction visibility throughout their distributed value chain. This collaboration allows product, pricing, and promotional information to flow from the supplier to the independent distributor. It also allows sales transactions to flow from the independent distributor back to the supplier so that the supplier can provide this information to the large (and demanding) retailers. Therefore, it is really the route accounting systems which allow the large beverage supplier organization to provide retailers the e-commerce supply chain collaboration they demand.

I have been without a home personal computer for nearly a year now. After the hard drive failed in the family desktop for a second time in 6 months, I packed it up and moved it to the garage (a trip to the electronics recycling facility is coming soon). I have been delaying the purchase of a new computer because I don’t want the hassle of administering virus software and installing new applications.

Now, through my recent exposure to SaaS and cloud computing at work, I am starting to rethink my needs at home. Very soon HighJump will be announcing that of our newest route accounting platform, HighJump RouteCenter, will be delivered in a SaaS model. This model allows our customers to focus on what they do best – selling more beer, wine, spirits, and soft drinks – while we worry about maintaining hardware and network infrastructure. No longer will customers need to worry about data centers, electrical, cooling, system administration, patching, cabling, and other low-value but expensive IT infrastructure costs. Additionally, our customers get a “network effect” as they can leverage pre-defined integrations to major supplier organizations like Coca-Cola, Pepsi, Anheuser-Busch, and MillerCoors. We have projects underway to expand this approach across the product suite and even run on commercial cloud solutions. These are exciting developments! I am convinced this will change the way customers think about their IT going forward.

Now back to my home computing situation….I don’t really need a personal computer (or Mac). I need a window into the cloud that allows me to access photo collections on Flickr, my friends on Facebook, office applications from Google or Microsoft and email from Google. So it looks like a NetBook is the newest item on my shopping list!

HighJump Software just had another customer go live with HighJump Warehouse Advantage and the Embedded Voice module. This customer is a third party logistics provider who plans to use the improved productivity and accuracy of their voice-enabled WMS Warehouse Management System to help them gain additional clients. Yesterday we released a video success story on Fox Racing who also utilizes embedded voice technology in their operations. See the Fox Racing video. The benefits of voice technology in the warehouse seem well understood by most distribution professionals I speak with. Most are quick to point out improved productivity (takes less time to accomplish tasks), safety (workers are hands and eyes free), and accuracy (complex check digit validations). Yet I often hear several misconceptions about voice technology that prevent adoption. Below is a listing of five common misconceptions I frequently hear about voice technology.

1.       I require proprietary hardware solutions for voice.

At one time this was true. However, voice technology providers like HighJump Software’s partner Vocollect, have worked with the leading rugged mobile computer manufactures to provide a solution that runs on a traditional device used in the warehouse. It is now possible to utilize the same device to accomplish both voice processes and traditional RF scanning processes.

2.       It does not work in the language spoken by warehouse staff.

With HighJump Software’s voice solution, warehouse workers can speak to the device in any language they choose. The recognition technology will respond to spoken commands in any language. Additionally, HighJump Software’s WMS Warehouse Management System is fully internationalized so warehouse employees can be prompted in any of the languages supported in the system.

3.       I don’t need a WMS if I have a voice picking system.

Voice enablement is a standard feature in a best of breed WMS Warehouse Management system. The voice technology allows multiple processes such as picking, cycle counting, and put-away to be automated with voice-based interaction with users. A voice system does not optimize all functions within a warehouse and assign warehouse work in the most optimal way. In addition, a best of breed WMS expands beyond the four walls of the distribution center to integrate with suppliers (supplier enablement/supplier integration) and customers. These extended features are not found in voice enablement technology.

4.       Voice picking systems simply voice-enable RF prompts.

Most distribution professionals focus too much on the voice technology and not enough on the process differences between traditional RF prompting and voice prompting. Interacting with a text based interface can be completely different than interacting with a voice system. Workflows often need to be optimized for a voice environment. This often means reducing the number of commands spoken and shortening operator response. There is also a different approach to validation because bar code scanning is often minimized in voice environments. 

5.       My distribution center is too small for voice.

Voice technology is not just for the “big boys” any more. Simplified WMS integrations make voice implementation straight forward for the end customer. The emergence of multi-modal hardware solutions also mean that distribution centers with smaller teams can have team members easily move between voice enabled processes and non-voice processes. Voice technology represents a strong ROI for any distribution professional who wishes to improve productivity, accuracy and the safety of warehouse employees.