Supply chain: what retail is doing right
Discount retailers seem to be doing well catering to their customers' needs for a good deal. What business lessons can we draw from the retail sector?
By Tom Andel, Editor in Chief -- Modern Materials Handling, 1/1/2009
Modern talked to Joe Andraski, president and CEO of VICS, the Voluntary Interindustry Commerce Solutions Association, which is dedicated to cross-industry movement of product and information among retailers and suppliers. Here are highlights from the interview.
Modern: How is the retail sector making out in this financial crisis?
Andraski: Some talk about this as being a recession-proof business, the P&Gs, for example. Everyone has to use detergent, so there are some verticals that will do OK. Anyone that's into discounted prices right now will continue to do well. Now is the time for companies to evaluate their business practices. In the past when we were flying high, money was coming easy, home sales were up, and the related industries were doing well, we saw a lot of positive signs as to how companies were doing. That led to some companies developing business practices or accepting changes in business practices that weren't the right thing to do in the long haul.
Modern: Similar to what happened in the auto industry, with the proliferation of so many different models?
Andraski: Another example of that is Gillette before it was sold to P&G. They took a hard look at their A, B and C items, and the service levels to the customers. They found they had a plethora of C items they weren't selling much of, but what they were selling they weren't shipping in complete orders. Inventories were up, service levels were down and customers were dissatisfied, and they weren't making the kind of money they should have been. So they rationalized their offering to customers. They got to the point where technology was able to give them the information they needed to manage their business.
Modern: So information technology has helped during these tough economic times?
Andraski: Over the last several years a lot of companies have invested in ERP systems. Somewhere in the organization, whether IT or the people who were developing the functional specs, decided they were going to make modifications. New people coming on don't necessarily understand all these systems and everything that was put in. Over time less and less of the functionality is used because the people coming on or being promoted don't even know it exists. About 50% of the information is passed from the incumbent to the person coming in.
Modern: With all the mergers and acquisitions and turnover that must grow into a real problem.
Andraski: Absolutely. We're a global economy, and while we've seen a lot of benefits with low cost labor provided by South America and Asia Pacific, I don't think we have the talent within organizations today to be able to manage the outsourcing that's been taking place over the last 5-6 years. The other side is, we haven't done a very effective job of educating the people in these foreign countries.
Look what's happened with Melamine, and with the lead-based paints. We opened an office in Beijing that is helping to educate the China business community in apparel. The China National Textile and Apparel Council has come to us, 10,000 members strong, saying we can no longer depend on low cost labor to be competitive worldwide. We have to get much better at how we manage our customer supply chain.
Modern: Where does organizational responsibility lie?
Andraski: Senior management has abrogated their responsibility and pushed it down into the organization, and decisions being made are having broad ramifications. They're placing unique and specific requirements on their trading partners, and now it's become so widespread that the manufacturing companies are having a hard time keeping up with these multiple and varied requirements. That goes against simplification and streamlining. There should be a common way of doing business between trading partners, whether you're in automobiles or apparel. When I was at Nabisco, I quickly found out we were into EDI but very little of the information that came to us via EDI could go right into the system. We had to print it, somebody had to look at it and somebody had to re-enter it into the system because all the retailers thought there were specific deals that went against the standard. 27 years later we're still doing the same thing.
Modern: What's being done about it?
Andraski: We've taken all the key EDI transaction sets and boiled them down into business implementation guidelines. A major part of what we have to do is an educational program, so in January we have a 5-stage webinar series that helps companies understand what you need to do to meet customer requirements. There's a wonderful opportunity for companies to step back and look at the effective ways they can be doing business, how can they become more efficient, how they can meet requirements for visibility and speed to market.
Supply chain software at Frontline Solutions
08/29/2005Supply chain management blues
07/31/2003
View All On-Demand Webcasts
