Advances in supply chain management (SCM) technology have often been slow to come to the retail party. But retailers like Wal-Mart Stores Inc. changed that. They demonstrated that investments in SCM can create a differentiator. Still, the question remains: What persuaded retailers like Wal-Mart to invest in SCM? And what changed in the last decade to drive SCM investments?
A lot has changed, in fact. In these difficult times, the retail industry attempted to conduct business more strategically to bring fresh focus to its transportation and warehousing processes. And as markets get larger, interestingly, there is a return of the drive towards the regional warehousing concept vs. relying on a single warehousing site to service all customers and locations. Common sense tells us that being closer to the customer helps business respond faster to demand. And with fuel prices continuing to fluctuate and add to costs, operating in areas that help optimize transportation costs is a prime requirement.
It also helps that this network strategy works just fine from an environmental perspective as well. We are increasingly being put to the test with problems related to environmental degradation. Simple solutions such as using the same vehicle and/or equipment that is used to bring products into distribution centers for outbound shipments to stores can make a big difference in better managing transportation costs and reducing asset capacity constraints. The challenge here is to manage the complexity that strategies—such as continuous moves throughout the supply chain—require.
The need is for smart, intelligent systems to help optimize daily decisions for retailers whether it is identifying optimum shipment sizes, automatically selecting the right mode of transport—from rail, truck, air or ocean—or accurately forecasting demand for individual stores. Once organizations are geared with the right tools, cash committed to inventory and other supply chain-related expenses comes down and the risks for excess inventory reduction actions, such as markdowns, are reduced.
SCM systems bring on the value
Intelligent SCM systems address a long and formidable wish list.
- They enable multiple warehouses with a regional focus;
- They enhance response to changing markets by identifying optimum locations for warehouses and suppliers;
- They help improve real-time supply chain visibility;
- They introduce ideas for more efficient fleet and shipment management;
- They help optimize shipment sizes;
- They enable improvements in forecasting of customer and store demand to help increase product turns and sharpen just-in-time inventory management capabilities.
The direct impact of employing SCM tools can be measured in areas such as reduced costs; improved equipment utilization; increased labor utilization and better warehouse space management; along with better inventory visibility and connectivity with key trading partners. The indirect implications of employing these tools can be realized in other important areas such as recruitment, training, costs, rewards and employee retention.
It is reasonable to assume that central to this transformation in warehousing, shipment and inventory management will be a high degree of automation. The good news is that technology continues to improve, making it possible to bring down the cost of implementation permitting an organization to employ multiple types of automation throughout their supply chain network.
Today, we have voice technology; more efficient and accurate ways to manage data entry; the growing use of sensors to monitor product and asset conditions; continued advancements and usage opportunities for bar-coding technologies and RFID; along with GPS that can be deployed for increased visibility throughout the supply chain.
The challenge for retail is to how to best integrate the disparate technologies and systems such as quality management systems (QMS); WMS; transportation management systems (TMS); enterprise resource planning (ERP) systems; learning management systems (LMS); and operating management systems (OMS) to mine data across the enterprise for business intelligence.