- Specific refers, for example, to the ability to support non-standard/custom SKUs tailored to individual customer requirements, such as bonus packs or custom case packs.
- Hybrid encompasses non-uniform case and pallet configurations tailored to unique customer requests, e.g. store/aisle "brown case" pallets.
- Exact will be a universal prerequisite for anyone who wants to operate on the new playing field. It's defined as "delivering the perfect order—on-time, in full with accurate invoice," says Monahan. "This is going to be the new standard. Everyone will be expected to provide better than 99 percent perfect order performance in the not too distant future."
- Fast references the order-to-delivery cycle, but can also mean compressed lead-times in other areas, too, such as product development and launch, and promotional activity.
"Eventually," Monahan adds, "we can envision much of this activity taking place in a scan-based environment,"—where manufacturers are paid on scan, i.e. on product movement at the retail point-of-sale.
To better align their operations with the needs of customers, manufacturers will have to develop far greater levels of sophistication in planning and forecasting, including the ability to do collaborative forecasting with customers, and planning down to the SKU level by individual store location.
Currently companies plan their activities at the DC level, or the region, or perhaps the store," notes Sumit Chandra, A.T. Kearney principal. Going forward, retailers will want manufacturers to align their supply chains to the needs of individual categories and SKUs at specific stores.
What kind of information systems will be required to support all these new varieties of operations?
"The level of information: the level of detail, the frequency at which it's being updated, and the sheer quantity of data that must be acted on far more rapidly, will represent an exponential increase" over what companies are used to today, Chandra says.
Having a good Enterprise Resource Planning (ERP) foundation with transparency and interoperability across all operations and platforms will form the groundwork for whatever else a company wants to build as far as IT resources, he suggests. Increasingly important, also, will be ability to exchange data and create close linkages with a variety of trading partners, including logistics services providers, if they're part of the chain. To create the IT architectures and build the resources they'll need to function in this brave new, fast, flexible world, companies need to do some proactive planning now, is A.T. Kearney's overriding message.
"As we look at our clients' IT agendas, most are pretty focused on the problems of today, with their resources mainly committed to whatever they see as their needs for the next six to 12 months.
"However, management also needs to take a longer view. Companies should appreciate the enormous challenge facing them in terms of the amount of information they'll need to store and the sophistication and flexibility with which they'll need to be able to act on their data," says Monahan.
"This means they need to set aside a sufficient portion of their portfolio, in terms of effort and funding, to address their strategic items for the next three to five years, not just what's immediately on their plates for the next six to 12 months," he stresses.
"Companies need to step back and see if they actually have a clear business strategy as far as what they want to accomplish, that goes out several years," Monahan adds. "Then they have to look at the supply chain, and establish some clear supply chain targets to support."
These should be more specific than mere "functional excellence," which has been the focus for most manufacturers to date. This approach has allowed companies to achieve some localized optimization, but to optimize an entire supply chain, planners have to look at strategy, and collaborate with partners on an integrated plan of attack.
Filling The Gaps
Once they've gone through the exercise of developing a strategy and designing the supply chain to carry it out, the next step for most companies is to perform a gap assessment, Monahan notes.
"Management needs to say here's what we want to do, here's what we need to support that, here's what we need to add to our current capabilities to make it possible."
Companies who complete this exercise, and compare it to the portfolio of projects currently on their IT department's plate frequently discover a pretty big gap between the projects budgeted and those needed to fulfill their long-term strategic plan, Chandra observes.