Tony Standley

AS one of the originators of simple shop floor stock replacement from suppliers in 1988, it is obvious to me in 2008 that the Australian and New Zealand supply chain industry has gone backwards in explaining the ‘supply chain’ in simple efficiency terms.

Simple, closed-loop, shopfloor-to-supplier EDI benefits are being lost due to the retail industry being incapable of embedding basic ORDER / ASN / POA documents as mandatory retailer / supplier relationship documents.

There is absolutely no sense in moving to online networks and data synchronisation without these basic supply chain document principles in place.

Instead of EDI supply chain being the original simple ‘just-intime’ retailer and supplier solution, it has evolved into a poorly understood structure, unnecessarily complex in nature and not understood by many retailer and supplier CEOs.

There is a view that it is in the interest of some IT and supply chain executives to make simple EDI supply chain processes complex to justify their existence.

Questions and answers
1. Does it take more than four days to replace stock on shelf from the time of the last sale?
Perhaps you should take a look at the basic ORDER / ASN / POA document and the supplier relationship.

2. Are you carrying more than two weeks cover on basics in reserves, backrooms or in distribution centres?
If so, your supply chain solution is failing to deliver benefits.

3. Is the cost of maintaining internal proprietary supply chain processes being challenged?
If not, there is a possibility that you are employing unnecessary levels of support personnel in your organisation.

4. Are you moving to a web-based EDI ORDER / ASN / POA structure?
If not, you could have an unnecessary expense embedded into your supply chain structure.

5. Have you recently challenged the costs of internal proprietary supply chain solutions compared with outsourced solutions?
If not, you could be bearing substantial unnecessary costs.

6. Have you recently challenged the amount of distribution centre space in play due to the need to carry substantial buffer stock?
If not, this could be a hidden growing cost to the business.

7. Have you recently investigated the need for ‘owned’ distribution centres, and have you considered outsourcing distribution through low-cost, flexible 3PF distribution providers?
As a rule, retailers do not make good warehouse / distribution centre managers, as there are too many internal vested interests, particularly buyer interests.

8. Have you really looked at the benefits of China-to-shelf supply chain using basic EDI documents as the basis of communication?
If not, you could be missing out on benefits of increased margins, increased sales and substantially lower costs of distribution. As a comment, taking supply chain processes in-house has never been sensible or necessary; supply chain is an evolving creature, it should remain an outsourced business function to limit internal system redundancy as supply chain technology and processes evolve.

9. Have you really looked at the benefits of RFID embedded into your supply chain?
Are you being told it is too hard or ‘that our system would have difficulty coping’?
If these are the answers you are getting, question the ability of your IT / ecommerce advisers.

10. Have you really looked at the latest CMI / VMI options using RFID or supplier-based solutions?
If not, you could be spending too much money on your ERP solution doing the job your suppliers could do more efficiently.

The costs of embedded proprietary supply chain solutions are becoming a problem for some retailers. The promise of beating outsourced solutions including WAN options has not been delivered, the result is unnecessary embedded costs and processes.

Some retailers and suppliers have historical supply chain structures in place that are not assisting quicker delivery of stock to floor, and if investigated, they would actually be found to be an impediment to efficient replacement of sold stock.

Australian and New Zealand retail and supplier CEOs need to have the courage to cut out the fat, taking a razor gang approach to embedded proprietary processes that are adding cost, but no value, to the business.

Two of Parkinson’s Laws stated: “Work expands to fill the time allowed” and “Expenditure rises to meet income”.

In 2008, a new Parkinson’s Retail Law could state: “Stock expands to fill available distribution centre space”.

In 2008 smart retailers and suppliers are outsourcing distribution centres to save costs and provide real, lower-cost stock distribution flexibility during peak trading periods, such as Christmas.

The promises of China-to-shop floor double-digit sales increases, double-digit margin improvements, double-digit distribution cost reductions are being stymied because basic local EDI loop relationships are not embedded into current supply chain processes.

The similar promises of item-level RFID double-digit sales increases, lower stock levels, close to 100% stock accuracy, lower shrinkage are also being stymied due to embedded proprietary processes getting in the way.

Good retailing times over the last ten years have hidden the growth of inefficiencies in the Australian and New Zealand supply chain industry.

Moving back to normal trading times, the unnecessary costs of inhouse supply chain management has to be challenged and reduced.

The review and implementation change process for some retailers and suppliers will be painful but necessary business surgery to satisfy the needs of shareholders and owners.

Cutting out the supply chain ‘fat’ and moving back to the original promise of in-time stock to shelf will allow China-to-shelf and item-level RFID benefits to flow to the Australian and New Zealand retailer and supplier supply chain industry.

Australian and New Zealand retailing is returning to normal trading, but without the high growth in sales experienced over the last ten years. It is beholden on retailer and supplier CEOs to challenge their IT and supply chain processes to maintain or lower costs moving into 2008.

In conclusion, the Australian and New Zealand supply chain industry players in 2008 do need to take that 'cold shower' and get back to basics, in the best bottom line interest of their organisations.

Having been at the dawn of EDI supply chain in Australia and an advocate since, I believe that I am entitled to take strong views on the state of supply chain processes in Australia and New Zealand.

It is hoped that my thoughts are seen to be helpful and useful to retail and supplier CEO’s who want to challenge this important retailing issue.

I am happy to be challenged on my views and I look forward to having dialogue with retailers and suppliers, especially those who have the courage to challenge current processes.

Wishing you a great 2008 in selling and trading.

Tony Standley is the principal of the Retail Alert Group. Contact Tony on 041 924 0497, email info@adsass.com.au or visit www.retailalert.com.au.
 

*Excerpt from MHD Supply Chain Solutions, May/June 2008 (pp.20-1)

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