Supply Chain Technology

Eggs are a big hit at my house.  In fact, my wife has declared poached eggs to be her favorite food (while good, I can’t imagine passing up pizza for a poached egg, but that’s just me).  I assume that most families are similar to ours and eggs provide a quick, easy way to get some protein into any meal.  I think this is core to the reason why the current egg recall is hitting a sensitive spot for many Americans.

More than 500 million eggs have been recalled in recent weeks.  Nearly 2000 people report being sick from eggs thought to be carrying salmonella.  The eggs are traced back to a pair of Iowa farms with common ownership.  Like many food products the eggs were then marketed under multiple brand names and through various distribution networks. 

Some troubling information about this event is that despite the first signs of contaminated eggs occurring in May, the recall was not conducted until August.  The finger pointing between producers, government agencies, and consumers continues today.  Based on this recall, recent peanut recalls and growing concern by Americans over food safety, I would guess we will see more strict federal legislation governing food safety soon.  In fact, the timing would be perfect for the FDA Food Safety Modernization Act to pass the senate in September.

While many industries fight additional regulation, many major food brand owners have advocated for this type of legislation.  A CNN Money article highlights some of the financial impact on brand owners when a recall occurs.
•    Kellogg’s took a $34 million hit in their 2008 earnings as a result of the peanut recall.
•    Overall peanut butter sales volume declined by 22% at the beginning of 2009

As with most legislation, the Food Safety Modernization Act is descriptive in terms of authority, but vague in terms of how companies would implement practices to support improved safety in the food supply chain.  Here are a few pieces from the current legislation and my thoughts on how technology can be used to help enforce the process.

“require that each person (excluding farms and restaurants) who manufactures, processes, packs, distributes, receives, holds, or imports an article of food permit inspection of his or her records if the Secretary believes that there is a reasonable probability that the use of or exposure to such food will cause serious adverse health consequences or death”

This bill pertains to the majority of the food value chain.  Food chain participants must be able to create and store records related to the products they handle.  Clearly, technology can assist with the capture and storage of this information.

“Requires each owner, operator, or agent in charge of a food facility to: (1) evaluate the hazards that could affect food; (2) identify and implement preventive controls; (3) monitor the performance of those controls; and (4) maintain records of such monitoring.”

Again, technology will play a critical role implementing preventative controls and monitoring the performance of the controls.  Supply chain technology can help support best practices such as stock rotation (first-in-first-out, first-expired-first-out), lot/batch tracking, product labeling, and quality inspections.

Additional Resources:
Fisher Nuts improves traceability in manufacturing and warehousing operations with HighJump warehouse management (WMS)
Three Components of Product Traceability in the Food and Beverage Supply Chain
Mom’s Foods Case Study

Recently I read a blog post by Adrian Gonzales of ARC Advisory Group which included examples of how social media tools are being put to practical supply chain use in businesses such as Con-way, where Twitter feeds are helping match carriers with available freight. This combined with the fact that mobile internet use / wireless connectivity is growing faster than most people expected clearly demonstrates the practicality of two entirely different types of technology coming together to create an amazing hybrid supply chain solution. This leads me to wonder: is supply chain management ready to cross paths with social media?

On second thought, maybe we need to differentiate between operational supply chain management and supply chain management research and networking. Could it be that some supply chain management professionals are ready to acquiesce when it comes to testing and adopting some “bleeding edge” Twitter and mobile execution solutions if it leads to pragmatic business benefits, but that they aren’t ready to whole-heartedly make the jump into using Facebook and LinkedIn and Twitter as trusted sources for evaluating new technology purchases? What about giving feedback and collaborating about the solutions they already have?

Cisco recently won a “Best Use of Facebook” award for their Facebook fan page (http://www.facebook.com/Cisco). The page was originally created to aggregate all of Cisco’s social networks and content into one channel and create a unique experience for their fans, and now it’s grown to almost 80,000 members strong.

Seems my writing has led me to more questions than answers. What do all of you think? How to supply chain technology buyers like to collect peer group feedback on purchases and vendor experience? Are you ready for supply chain software vendors to jump in wholeheartedly with social media efforts beyond the popular blogs?
 

What sales model works for you, and why?

Today I would like to discuss some of the points associated with three business models for managing the point of sale inside a direct store delivery (DSD) operational cycle.

The “traditional” view of a DSD route driver is probably best described as one of the peddle salesman. The driver takes his load of goods to his list of daily stops and restocks his customer’s shelf space, while attempting to leverage that relationship by getting the product(s) into more & better shelf space. Despite the changes over the years, this model definitely still exists in one shape or form in many operations. This model certainly helps many smaller-end clients minimize their costs by making last minute purchases of minimum quantities.  However, the cost to taxi product from place to place, and the operational requirements to restock the truck at the end of sales cycle (typically per day) is definitely not favorable for the DSD distributor. It also creates obvious supply chain challenges ensuring sufficient stock is allocated/available, while tying up inventory on the truck that others may have been able to sell had it been in a central location.

If you move beyond the traditional, many suppliers go with what I would call a “Hybrid Presell” model. In this case the driver delivers goods, as well as places the order for replacement stock for future delivery. This model provides the distributor with advanced knowledge of order quantities and can therefore use operational capacity to build deliveries/loads with appropriate resources. However, this combined role can generate new challenges. Traditional compensation/incentive model (i.e. per cases sold) means the driver is better served by having a relationship between the driver and the customer, thus prohibiting the possibility of utilizing a route optimization solution. You also suffer from having contradicting requirements for the driver. This driver wants to get in/out of stops as quickly as possible to maximize delivery cases, but should also want to spend sufficient time to develop account relationships to enhance future opportunities.

If you complete the division between sales and delivery roles, you end up with dual resourcess: one delivery driver responsible for product movement, and a pre-sale resource that is responsible for managing orders and perhaps some additional tasks like merchandising or helping with vendor managed inventory. There are definitely benefits to this model, as you get to utilize resources for specific tasks to their strengths, without having to divide their energy/attention. You also get the freedom to effectively utilize a route optimization package given the established relationship between pre-sales and client with limited risk of damaging customer relations (see my previous blog post on that topic). However, this obviously means an extra set of wheels on the road to get face to face customer interaction, and the costs that go with that.

Changing from the traditional "face to face" model of sales, and utlizing either tel-sell or web-based ordering is yet another method to split the delivery and sales roles.  This reduces the costs listed above, perhaps giving the DSD distributor an "easier" fit, since the benefits remain but you then have to determine the value of that customer interaction.  Is your sales force going to continue to be as effective without it?

So which one is the “best” scenario? As with most things in life, I believe the answer is “it depends”. There are great many factors to consider, some key points to consider are:

-          Geographical distances between stops on your routes and from warehouse to stops.

o   The further you are driving the less likely you want to send a second vehicle to service customers.

-          Ability of resources to handle dual responsibilities.

o   Obviously you need this skill set if you are going to attempt the hybrid model so resource limitations may force your decision making as well.

-          Supply chain costs associated with building orders in advance or at the last minute.

o   Stripping trucks, operational down time during the day, and night crew efficiency all factor in here forcing you to make difficult choices regarding servicing your customers.

-          Customer size and their ability to predict future order requirements.

o   Smaller customers typically suffer from more extreme peaks and valleys of demand, so being able to handle/support these is of utmost importance here.

-          Customer is willing (and able) to support a non face-to-face sales model.

o   Possible resistance to technology changes or ordering limitations may limit the opportunity for benefit here.

What were the key factors that you used to determine your sales model?

I have to admit I am not an avid World Cup soccer fan...but I have enjoyed the coverage and subsequent drama unfold with a few of the higher profile upsets and controversial rulings on the field.  The ironic story regarding the English team's history with the "Ghost Goal" certainly caught my attention (England clinched its only World Cup victory in 1966 with a similar dispute goal line marker) as the one disallowed versus Germany, en route to a 4 - 1 German victory.

What I found particularly interesting was reading how Sepp Blatter (FIFA President) first maintained the "human aspect" of the game was key and could not be replaced, only to later change positions and seem open to technological advances to assist the officials.

http://www.guardian.co.uk/football/2010/jun/29/sepp-blatter-goalline-technology

How does this relate to direct store delivery (DSD) companies and their challenges?  It seems that Sepp did some soul searching and came around to the concept of at least considering, if not implementing, technological advances.  So what are some signs for DSD companies to recognize when it is time to move forward with a project that advances their use of technology?  Below I talk about five points that really should trigger at least an investigation into what alternatives exist.

1.  Hinderance or Help?
Your company bought that software (route accounting systems (RAS), mobile sales solutions, or maybe an inventory application) or possibly hardware with the intent of helping your employees get the job done faster and better than ever.  At first things were great and you saw immediate improvement in your daily process, but those days are gone.  Today you are more frequently forced to create work arounds or miss opportunities all together due to limitations in your technology suite rather than it helping you achieve improved results.

2.  Reliability Issues?
How often do you hear your route drivers complaining of having to "re-key" a route due to data loss?  Or perhaps a rushed purchase order has been placed due to an unrealized inventory issue from a batch posting failure?  A better question would be - how many times can you let this happen before you realize there is a problem?  Whether it is hardware or software that is letting you down, when these solutions start to impact your business due to failure it may be time to act.

3.  Falling behind competitors?
When the calibre of your lawn falls behind that of your neighbors there may be some good natured teasing involved, but not much more.  When your ability to deliver goods, invoice accurately or manage your supply chain falls behind your competitor you have a much more serious issue to deal with.  In today's economy DSD providers are having their margins tightened while dealing with increased costs, so this is no time to give your competition a head start!

4.  Increasing Cost of Ownership?
What did your IT staff look like when you first implemented your route accounting system?  How did you roll out sales process changes with your route salesmen?  What budget do you allocate to these activities now?  Upgrades, maintenance, support and enhancements are all costs that hit the bottom line.  If your IT spend continues to grow but your ability to handle new functionality (or possibly even maintain the status quo) hasn't progressed, isn't it time to start asking why?

5.  End of Life?
Perhaps one of the more feared phrases of the IT world, if the above listed points haven't triggered the proverbial "spidey senses" then this one surely will start your temperature to rise.  When Microsoft or IBM delivers the notice that product "X" is getting the End of Life treatment you may be able to stretch your utilization past the date, but if anything goes wrong the costs to support / correct / replace will be substantial.  Better to act quickly and start identifying alternative paths to support your business. 

The list of compelling events for your operations may be considerably different depending on the circumstances in which you exist.  But by reading this, I trust that you are actively monitoring where you stand in your technology's life cycle...and good luck making your decisions!

After receiving great feedback from my previous video blog, I decided to try it again. This time I'm on the road in Atlanta at the Chief Supply Chain Officer Forum. In this video blog, I discuss the relationship between shippers and logistics service providers and how technology can help.

 

Having trouble viewing this video on YouTube?  Click here to watch this video on the HighJump website.

HighJump Software announced Foster Farms Dairy has selected the HighJump warehouse management system (WMS) to optimize its operations. The company processes a wide variety of dairy products at three plant locations and distributes throughout northern and central California from multiple branch facilities. In the project’s first wave, the HighJump WMS will be implemented in the company’s three manufacturing locations and one of its distribution centers.

Foster Farms Dairy recently began a search for a warehouse management system as part of its commitment to continuous process improvement and satisfaction of customer quality and service needs. Lon Nebiolini, Technology & Systems Director Foster Farms Dairy, said “We selected HighJump Software because of its strong reputation in the marketplace, successful applications in the food and beverage industries, and its full suite of supply chain execution solutions, which Foster Farms Dairy plans to take advantage of in the future. Another important factor was HighJump
Software’s adaptable architecture, which will maximize flexibility with respect to changing business requirements without excessive costs or business disruption.”

Read more about Foster Farms Dairy's selection of the HighJump warehouse management system (WMS).
 

HighJump Software is proud to have been included once again on the Supply & Demand Chain Executive 100.  

About the honor: Each year, Supply & Demand Chain Executive identifies leading providers of supply chain services and technologies who are helping customers/clients achieve supply chain excellence and prepare their supply chains for the post-recessionary return to growth. Based on submissions to the "100" from end users and solution providers, the editorial staff of the magazine has compiled a list of leading supply and demand chain innovators.

Final recipients are featured in the cover story of the May/June 2010 issue of Supply & Demand Chain Executive, as well as online at www.SDCExec.com/SDCE100.

No this blog entry is not going to be a behavioral reminder from your pre-school teachers…rather this is about how the supply chain software market continues to change, specifically for DSD users. Long gone are the days where features and functionality were the key factors to any software purchase decision. It is true that without solid functionality and key market features software will quickly drop off the desirable list, but these two points are merely the first gauntlet to pass towards a positive decision regarding software selection.

Today, being able to provide “out of the box” integration options, tool kits and breadth of product solutions are more important than ever in the DSD world. A next generation RAS is great, but what else comes with it? Does it provide a flexible mobile sales solution? What about your inventory and truck loading solutions? Traditional (aka Green Screen style) RAS solutions have been able to provide batch data entry for inventory, and load sheets for your picking team but does this technology really cut it in today’s world? That covers some of the basic points of entry of data into your system…but what are you going to do with it once you have it there? Do you have a robust report generation solution? Even better than that, how about a data mining tool with not only canned reports, but also an easy interface where users can define their own “custom” queries to identify the exact data elements you want and need for executive dashboards?

Beyond what I would consider fairly “standard” offerings listed above, many operations are running back end ERP software solutions as well. Being able to provide reproducible integrations to these solutions is quickly becoming as important as the software solution itself. Software users today have existing structure and systems that are not going away, and any future solutions must integrate easily and seamlessly in order to maximize benefit of your DSD solution. This is one area where most companies want to avoid being on the “bleeding edge” of technology, and would really prefer to see an offering that can reference others.

Another reason to consider integration options is as simply as taking advantage of the strength of other solutions. Leveraging the functionality of other solutions not only provides the users benefit, but can do so in a more cost effective manner (if done properly) than building additional modules outside of your core competencies. This may be a difficult decision for some to make, but I think that this is an area that can definitely be used to your advantage if properly evaluated.

I will end this post with the following question…can you really only consider one component to your DSD solution in isolation, or will you look at the end to end integration of all components?
 

Greetings from 35,000 feet! I am on my way to the west coast for meetings with another prospective HighJump warehouse management system (WMS) customer. This visit will likely be consistent with several meetings recently with large companies who are looking to standardize their WMS platform and move away from homegrown systems. This sounds like a fairly straightforward proposition…until you get into the details.

In each of my meetings, the company has strong feelings that their current homegrown WMS system provides them a true source of competitive advantage. It is not that the system contains “industry best practices”; these homegrown systems enable distribution processes that are actually sources of differentiation from competition. The processes and the systems supporting them are years in the making and unique to each business. By definition, many of these competitive advantages will not be found in traditional commercial off the shelf software – they are proprietary, confidential, and not available to everyone in a given industry.

These companies are pursuing commercial software as a means to reduce IT complexity and reduce total cost of ownership – common objectives of a WMS standardization initiative. However, there is reluctance to proceed based on the sources of competitive differentiation these companies have with their homegrown systems. In the traditional enterprise software approach, these companies will be forced to purchase commercial software, pay exorbitant fees for customizing it to enable their competitive advantage processes, pay exorbitant fees to upgrade (or elect to stay on old technology), and risk that their technology vendor will think their practices are so great that they should be put in the next version of the “standard package” (thus making the competitive advantage available to everyone).

HighJump offers a unique approach.

HighJump’s Supply Chain Advantage suite is architected with an expectation that you will want to enable business processes that are sources of advantage on our technology stack. It is HighJump’s philosophy that 80% of supply chain practices are not sources of differentiation and should be covered by industry supply chain best practices enabled with standard product. However, we also expect that there are 20% of your supply chain processes that are potential sources of competitive advantage. For this 20%, we provide a flexible workflow architecture that allows end users to modify the workflows in the product to support their sources of competitive advantage.

This presents a “best of both worlds” value proposition for our customers. Customers moving off homegrown systems get the benefits of commercial software (new releases containing technology and functionality updates, a worldwide product support organization, and technology partner that will stand by them in the long term) with the flexibility to support their business processes that are sources of competitive advantage.

Related Resources:

HighJump Adaptability Datasheet
GM2 Video: 3PL achieves supply chain success using the HighJump Software warehouse management system (WMS) 

HighJump Upgrade Video

 

Sitting on the plane heading back from NA 2010, I am looking back over the questions I was hoping to get answered at the show. The first question was: what is the overall attitude toward the economy? The overall sentiment that I heard was a hopeful optimism. There are many signs pointing towards a slow but steady economic recovery. The recovery is being felt currently by some while others wait patiently for the effects to reach them. As one gentleman whose business provides material handling equipment pointed out, their business takes a little longer to incur the effects of the recovery because of the systems that need to be put in place in order for there to be a need for their equipment.

 

The second question asked what technologies would be most talked about at the show. While this is a difficult question to answer because of the many different types of vendors at the show, I will try to sum it up. In the supply chain logistics software industry there was a definite interest in SaaS or "in the cloud" solutions and how they are evolving. In fact, HighJump Software just announced the launch of HighJump WMS in the Cloud.   And while I didn't get a chance to spend a whole lot of time in the material handling areas, there was a continued focus on automating every part of the warehouse to make it most efficient.

 

Finally what changes have been brought about by the economic conditions? The biggest change I saw was questions being asked much more about upfront cost rather than ROI because of the challenge of getting capital expenditures approved. Everyone seems pretty reluctant to call the recession over, but all signs seem to be pointing up.

 

As we approach NA 2010 and everything supply chain is converging on Cleveland, I am wondering what to expect at this year's show. After an extremely trying past year economically, I am looking forward to seeing what this year's show has in store. With this in mind I have come up with a few questions I will be looking to get answered at the show.

 

What is the overall attitude towards the economy?

With as much optimism as I have heard, I have heard just as much pessimism (or should I call it doubt). The media hands out mixed messages about where the economy is going, and I am looking forward to hearing what the overall attitude is from those in the supply chain industry as it is a good barometer of the conditions.

 

What new technologies are being talked about the most?

Every year brings a new landscape of technologies as well as new developments to old technologies. I have a feeling it is going to be a year of many exciting new technologies as companies try to attract the businesses who are just starting to pick up where they left off before the economy took a turn for the worse.

 

What changes have been brought about by the economy?

Undoubtedly the economic climate has changed some thinking about how companies are going about the way they organize and run their supply chain, and I hope to see what trends are catching on.

 

While I only have a couple of questions listed here, I will be writing more from NA with more thoughts. Whether you will be at NA or not, leave your comments below with thoughts on these questions as well as any questions you are hoping to find answers to.

Why am I happy that people don’t consider last Monday night’s college basketball game the greatest final ever?  Luckily for me Gordon Hayward’s shot glanced off the rim and backboard allowing Duke to capture our fourth national title.  Hats off to a great Butler team and a phenomenal tournament.

 

Now onto the topic of inventory. If you ask most CFOs, they would point to the balance sheet and tell you the dollar amount of inventory on the books.  It seems like it should be an asset; it is something your company spent time and money to create.  Heck, we make a living selling millions of dollars of software and services so companies can better manage and track their inventory with warehouse inventory management systems. 

 

So why is inventory not an asset?  Why does Dell dictate their suppliers locate their warehouses literally across the street from their facilities?  Why has the concept of consigned inventory become popular in the retail world?  Why do many companies such as Amazon and Target not ever inventory the item but allow the manufacturer/distributor to drop ship directly to the end customer?  All of the above practices allow the company with power in the supply chain to delay or completely remove the necessity to take actual ownership of the physical product.  Inventory has become the proverbial hot potato.  No one wants to take ownership of the inventory and if they are forced to, they want to own it for as little time as possible.  If inventory is an asset, then why does no one want to own it?

 

In almost every industry, the day the brand new product comes off the manufacturing line is when it is most valuable.  Every week, day, minute afterwards the inventory is at risk of losing value:whether it is actual expiration dates/best before dates for food products, technology obsolescence as everyone is pushing for the next generation product, or the latest edition update to a college text book.  This is why FIFO (first in first out) is such a popular pick algorithm as it rids the business of the asset that is declining the fastest and keeps the product with the longest runway on the shelf.

 

Another reason inventory is not an asset is the working capital it ties up.  Every piece of inventory your company has in its possession is money that could potentially be used elsewhere in the business.  The company loses the “optionality” to find the best return those dollars could generate.  While it is quite possible putting that money into inventory of a hot product is absolutely the right decision, once the decision is made you cannot get that dollar back and put it into R&D or hiring a new person.  This makes it absolutely essential that your company watch closely your investment in inventory.

 

It is surprising that many companies have not reduced the amount of inventory they keep in their supply chains.  In a recent post by Dan Gilmore at Supply Chain Digest, he details by industry how many companies have not appreciably reduced their inventory since 2004.  In a day and age when investment of every dollar matters, maybe people need to take a closer look on how to optimize their inventory levels throughout their extended supply chain. Supply chain management software solutions can help. Au revoir, Go Duke!

Related Posts:
Where is Your Inventory? Even Today Some Companies Still Don’t Know

All of the Inventory I Want to Ship Is Sitting In My Yard!

When Metrics Turn Evil

 

What’s so difficult? If you’re a third-party logistics provider (3PL)/logistics services provider (LSP), all you need to do is provide efficient warehouse management, exceptional inventory visibility, seamless freight management and timely and accurate 3PL billing. Oh, and you need to do it all more cheaply – and just plain better – than your customers can do it themselves. Bit of a tall order, especially when you’re trying to post your own profit too! 

I imagine trying to stand out among other 3PLs is similar to any other more commoditized service. You’ve got to: (1) Find a way to attract new customers and (2) Keep the customers you already have so happy that they’ll gladly tell their peers about how fantastic your services are.

One of the advantages of being in the fast-growing logistics services space is that technology providers have their development teams working overtime to create tools to make things easier for you. With modern supply chain management software, you have the means to achieve those two huge tasks. Here are a few examples.  

·         Facilitated on-boarding new customers – the quicker you can do it, the sooner you can get paid, right?

·         Getting the billing right – new automated 3PL billing technology is making it simpler make sure you are getting paid for each service you provide, and that you can easily account for those charges. You can also preset billing rules at a very granular level – a detail which might help your sales team seal a few deals?

·         Tracking inventory attributes – it’s the nature of your business – every customer wants to track different attributes, even if the items are exactly the same as another customer. Now you can set up detailed – and different – rules for each customer.

·         Offering more value-added services – the best way to set your business apart from 3PLs that just provide shelf space. These value-added services can be anything from repackaging to relabeling, kitting and light manufacturing. Adaptable supply chain technology can support the adding of new services that your customers are waiting for.

Guess it’s just perspective…it’s a challenging, cost-conscious industry, but you’ve got access to the technology to let you go grab your share of new business.

Related resources
Special Report: Four Ways 3PLs Can Harness Technology to Attract Customers and Drive Profitability

I was asked by a new HighJump Software customer to provide the welcome keynote at their annual sales meeting. This company is embarking on a shift from being primarily a provider of air cargo transportation services to providing a comprehensive set of solutions for their current and prospective clients.  HighJump Software provides a key role in this transformation by providing the supply chain technology backbone for warehouse management systems and billing management systems.

I ran into several of the attendees the night before my presentation at the hotel bar where a good time was being had all.  Surprisingly, the audience was very attentive for my 8 a.m. breakfast keynote even though many of them had a late night prior.

Some of the key points of my presentation were:

The Use of Logistics Service Providers is On the Rise
There are multiple market studies that have shown that an increasing number of companies are likely to outsource their distribution and logistics solutions.  North America provides a substantial opportunity because the use of outsourced logistics is more prevalent in Asia, Europe and South America than it is in North America.

Economic Uncertainty Caused Businesses to Evaluate Outsourced Logistics Solutions, Warehousing Solutions and Transportation Solutions
It was reported that 3,000 domestic trucking companies went out of business in 2009 and over 1 million shipping containers remained idle as a result of the global recession.  While overall volume certainly presented challenges for logistics service providers, the uncertainty in the economy caused many companies to rethink outsourced logistics solutions, warehouse solutions, and transportations management solutions.  It also caused these companies to rethink their current relationships with their logistics service provider.  As many companies were forced to do a deep dive on their financial performance, many concluded that using outsourcing allowed them to shift from fixed to variable costs and resolve balance sheet and cash challenges by selling assets associated with their supply chain.

IT Enablement and Broad Solutions – a Recipe for Winners
Buyers of 3PL services consistently state that IT enablement is a major consideration in choosing a logistics service provider.  Cost continues to be the number one factor (as it  should be) but logistics services providers can “change the game” by offering broad set of solutions, powered by technology and command premium pricing for these services.

Related Resources:
- HighJump Solutions Page for 3PL’s
- HighJump LSP Datasheet
- HighJump WMS Brochure
- HighJump Billing Management datasheet
- Georgia Tech/Capgemini 3PL Study
- Eye for Transport Web Site resources
- Are 3PL CEOs Bad at Strategy? By Adrian Gonzales of Logistics Viewpoints

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.

HighJump Software was recently named to the annual Food Logistics 100. The FL100 is a listing of technology solution and service providers selected by the editorial staff of Food Logistics magazine that are helping food, beverage and CPG companies gain a competitive logistical advantage.
 
“HighJump Software empowers food manufacturers, distributors and retailers to tackle a number of critical challenges, including increasingly complex regulations, rising costs and slim margins,” said Timothy Campbell, President and CEO, HighJump Software. “We’re honored to have been recognized by Food Logistics once again as a technology provider of choice for the food industry.”

Read the press release to learn more about how HighJump Software helps food and beverage companies with supply chain improvement.

I suspect, although it wouldn’t be admitted to in mixed company, that the presumption has oft been made that having any sort of route accounting software in place puts that direct store delivery business ahead of most. Quite a stretch, considering the increasing complexity of food and beverage distribution processes and requirements, and the extreme range of RASs out there (think old pick-up vs. shiny new SUV).

Now, that old pick-up was, in its day, the envy of many. It could even drive through some bumpy terrain. But now, although it [usually] starts, and can [almost] reach highway speeds, it’s not too reliable, and you need to visit salvage yards to find replacement parts. Not exactly the chariot you want your precious cargo riding in, and not exactly cost-effective. Not the most inspired metaphor, but not too far off?

So how do you know if you’ve got a route accounting system akin to that old pick-up? 
 

• Your processing times seem to be getting slower and slower. 
• You spend days trying to extract data for reports you need to run your business.
• It’s tough to get applications to work together and you’re spending a lot of time and money making integrations work.
• There’s only one person there who understands the necessary workarounds of your RAS – and he’s retiring next fall. 

No, we haven’t been shadowing you. The fact is: the symptoms you’re experiencing are quite common to DSD businesses running on dated technology. While your system may still work at a basic functional level (the pick-up still starts and runs, remember?), modern technology can provide new features, better access to company performance and smoother integration with other systems. 

You may even be interested in the “full maintenance plan” (to extend the vehicle metaphor painfully further) for a modern route accounting system – otherwise known as an on-demand, or hosted system. This option removes the maintenance headache completely by having your supply chain management software vendor host your system for you. There is no hardware to purchase or maintain and patches and upgrades are done automatically. 

This year may be the best yet for your direct store delivery business – do you have a swift, reliable and easy-to-maintain “vehicle” to get you there?
 

Congratulations to Overstock.com, a HighJump WMS warehouse management system customer, for once again placing second in the NRF Foundation and American Express'slist of the top ten retailers for customer service. The list is based on a survey of more than 8,000 American shoppers, conducted by BIGresearch. See the full list. 

HighJump System has helped Overstock.com provide award-winning customer service through an increased order fulfillment rate and near-perfect accuracy. The HighJump Supply Chain Advantage suite has supported Overstock.com’s growth from $40 million in revenue in 2001 to $834 million today. The company has also reduced warehouse labor costs by over 30 percent while achieving more than 99 percent inventory accuracy by location, despite a highly volatile SKU base.

Read HighJump's Overstock.com's success story (PDF) to learn more about the online retailer's great customer service and how the company utilizes HighJump's supply chain technology to implement supply chain management best practices.

Just when we thought we could call the Green Bay Packers playoff chances dead and anoint the Vikings as the class of the NFC….things change.

 

With Wal-Mart’s quiet back peddling on their initially aggressive RFID initiative or attempted Tiger Woods-esque call for privacy on the potential benefits from their investment, RFID has gradually slid into the trough of despair. Many technologies become over-hyped as service providers and consultants proclaim they can solve virtually any problem with the latest and greatest technology. Within the supply chain world no technology capability has been more hyped in the last ten years than RFID. But as is the case with many technologies that do not live up to the hype, companies start to shun them and become instantly dismissive of the potential benefits the technology could provide. Should companies put a stake in RFID? Is it dead?

 

I would argue that RFID will come out of the trough of despair and provide real/tangible value to companies….if they deploy it correctly. In the past companies have done one-off/point solution projects that provided little or no benefit, other than fulfilling a compliance requirement. A recent study by four university professors entitled “Empirical Evidence of RFID Impacts of Supply Chain Performance” offers hope to RFID enthusiasts. One of the study’s key findings was that for an organization to realize significant value from RFID required that the technology be deployed across the entire business operations or supply chain. A key point this study highlights is even deploying RFID throughout your company is unlikely to deliver significant value unless you are working closely with your extended supply chain (suppliers, manufacturers, logistics service providers, etc.). In order to remain competitive companies will be required to collaborate and work more closely with their supply chain partners. This will be a pre-requisite for companies looking to really leverage the value of RFID (in a non-closed loop scenario).

 

I recognize that I just advocated for deploying RFID throughout your entire extended supply chain but a key caveat: don’t apply it blindly. It is important that you consider the complete spectrum of data capture and communication options. There are several different technologies that can be used for data capture. Starting at the most simplistic pen and paper have been used prior to the adoption of barcodes. In most cases, companies have advanced beyond that to use one-dimensional barcodes, two-dimensional barcodes, multi-part barcodes, voice technology, etc. You need to evaluate if RFID (passive or active) is the right data capture and communication solution for the use case(s) you are considering. If you determine RFID is the right technology for the use case, per my earlier point above, make sure you examine the touch points of the process throughout your extended supply chain.

 

One last note that supports RFID’s return from the dead is the fact that the cost of the technology is becoming cheaper. As more RFID tags are produced, manufacturers gain additional economies of scale and can pass along those savings to buyers. In addition there have been several advancements in reading the RFID tags which in some cases have dramatically lowered the hardware costs. While this trend still needs to advance significantly to open up more potential use cases, it is trending the right way for greater adoption of RFID.

 

All in all, RFID has hit a sizable bump in the road like the Vikings did last week, but I don’t expect it to derail its long term prospects (or playoff chances).

When reviewing supply chain best practices, visibility to inventory levels throughout the different nodes in your supply chain should be one of the practices your company has embraced. This allows your company to be more nimble and still meet customer service levels when supply chain disruptions and exceptions occur.  RSM McGladrey recently released their 2009 Manufacturing and Wholesale Distribution Survey (registration required) which interviewed 923 leaders of United Sates manufacturing and wholesale distribution companies. Over 80% of the respondents held a C-Level position at their company. This report uncovered some interesting opportunities for improvement across the different functional areas of the company but I will focus on the supply chain and information technology responses.

 

An overall theme of the report is the global structure many of the respondents have established as two thirds of the companies source products internationally and 62% export products to at least one foreign market. However, the study notes:

 

           “Approximately 25 percent of companies indicate information flow

and inventory management information from their company’s supply chain consistently meets their business needs only some of the time or not at all.”

 

This is a fairly large percentage of companies that do not have the necessary inventory visibility to run their business. As has been stated many other places the largest cost in virtually every supply chain is the amount of working capital that is tied up in raw materials, work-in-process, and finished goods. If a company does not have good visibility to inventory levels, that generally drives up the amount of inventory required to continue to meet desired customer service levels. This is a clear area where modern supply chain logistics software can add significant value by providing more accurate and real-time visibility to inventory levels throughout the supply chain.

 

Another area of focus about the study was on the topic of information technology.  Just like in the area specific to supply chain, there are several areas for improvement:

 

• About one in five companies indicate current systems are not meeting reporting and data analysis needs
• A nearly identical number indicate current systems are not meeting operational and process improvement needs
• One in four companies indicate they do not have effective systems to communicate with customers and vendors

 

The above statistics show the rigidity of many legacy systems that hinder rather than enable process improvements and do not provide easy and effective ways to make data available for internal or external consumption. If your company is like the companies above, this provides a key list of criteria to evaluate solutions against when you are upgrading your information technology infrastructure to make sure you can meet the needs of today but easily adapt to the new requirements of tomorrow.