Question: What three things are important for companies to remain competitive in their segments of the industry?
Answer: Technology, technology and technology.
Companies are always testing and deploying new hardware and software solutions as they seek greater efficiency and competitive advantage. Not surprisingly, those on the cutting edge often lead the way for others to follow.
To find out the state of technology today, Food Logistics has assembled a panel of experts who will outline the status and future plans for their respective firms. The panel includes:
- Catherine Cooper, CIO, Ozburn-Hessey Logistics, a Brentwood, TN-based provider of global supply chain management;
- Nils Mueller, IDF Initiative Manager, SNS Demand Planning Services at Procter & Gamble, the giant consumer goods company based in Cincinnati.;
- George Labelle, CIO, IPC (Independent Purchasing Cooperative Inc.), an independent SUBWAY franchisee-owned and operated purchasing cooperative in Miami;
- Chad Symens, president of the Rainmaker Group, comprised of data warehousing and business intelligence experts based in Akron, OH.
What technology has your company deployed in the last year and what benefits or advantages have you had?
Mueller: Procter & Gamble introduced its Consumer-Driven Supply Network a number of years ago and continues to invest in technology to improve the company's ability to sense and respond to shifts in consumer demand.
In 2007 P&G began a global roll-out of Terra Technology's Demand Sensing software as part of a world-wide initiative to further improve short-term forecasting accuracy to lower safety stock and increase the competitive advantage generated from our supply chain. P&G is focused on winning at the two critical "moments of truth."
The First Moment is when the shopper is in the store and has the opportunity to choose which product to buy. The Second Moment is when the consumer uses that product. We must delight and win at both Moments of Truth. Supply chain excellence is critical to winning at the First Moment of Truth. As of today the software is live in 20 percent of P&G's businesses, and we expect to complete the global rollout in 2010.
What have been the results so far?
Mueller: Forecast error has decreased more than 30 percent and safety stock has decreased more than 10 percent, saving millions of dollars in inventory. The reduction in safety stock has been accomplished without increasing out-of-stocks. In addition to these savings, we anticipate further benefits from increased productivity in the workforce. Demand planners, free from emergency changes due to inaccurate short-term forecasts, are able to focus on the longer term, analyzing long-term trends and business intelligence about the marketplace and consumer behavior.
LaBelle: This year we focused on tying our systems together for total supply chain visibility and collaboration. We had different technology providers for two areas of our supply chain information services and we needed to see the entire picture in order to take advantage of additional savings opportunities.
Through consolidating our supply chain solutions under Instill Corp., we have managed to implement solutions that enable us to track 100 percent of our invoices from the manufacturer to the distributor and from the distributor to the restaurant; monitor contract compliance and landed costs; benchmark food and service quality issues for 25,000 SUBWAY stores and improve our limited time-offer business by providing near real-time monitoring of distributor inventories during these promotions.
Through the integration of our solutions, we have been able to save administrative time and identify new savings opportunities.
Cooper: Among the most exciting technological developments at Ozburn-Hessey Logistics we saw in 2007 where these two: Business Intelligence (BI) and Virtualization.
BI permits us to improve our decision-making processes because we now have the ability to work off fact-based data, rather than having to rely on the insight of our individuals. BI measures all our activities against financial information. For example, like many 3PLs, we utilize multiple warehouse management systems. Now data from all those systems is collected and consolidated.
That consolidated data then enters our BI system where it is reconciled against our financials. So now our financial information is the measure of truth, both internally and with our clients and serves as a common reporting tool.
Based on the data available from BI, we are able to make swift changes in our operations and create efficiencies and service improvements for our clients.
Virtualization is a proven software technology that, in essence, permits you to transform hardware into software. Multiple virtual machines share hardware resources without interfering with each other so that you can safely run several operating systems and applications at the same time on a single computer.
This brings significant reliability improvements to our clients. Because virtualization permits instantaneous recoverability, when there is a problem with one server-a power spike for example-we can stream data back and forth across other servers with no interruption of information. As a supply chain management company with many food and beverage clients, we know it is critical to keep perishable, regulated products moving according to plan.
Virtualization is also bringing new efficiencies to our IT services. We have been able to reduce our number of servers from 70 to seven and we achieved a 104 percent return on investment on software implementation costs.
Symens: CPG companies like Jamak Fabrication, which makes wiper blades for automobiles, are having great success in improving their in-stock and sell-thru by taking into account weather data when forecasting sales and on-hand activity. Jamak has long known weather impacted their sales, but until recently it was nearly impossible to conduct the analysis necessary to match daily weather data to over 3,000 retail stores for a half dozen products.
By taking advantage of new database and forecasting technologies, Jamak is now able to instantly access inventory and sales forecast reports by store for each of their items including a 15-day forecast using AccuWeather data and Rainmaker Group's Accelerated Analytics services.
Tell us about the results.
Symens: After a few months in the program, the results have been impressive, sales are up and out of stocks are down. Jamak's retail buyer is also taking note and getting actively involved in expanding and improving upon the program. Weather data is just the start, even if a business is not influenced by weather. A more complete forecasting model can be constructed using new technology to take into account factors like average income, age, location, etc.
What new technology do you plan to deploy in 2008 and what are your expectations for benefits or advantages?
LaBelle: We are deploying new reporting capabilities out to our trading partners so they can manage their business with IPC more efficiently and cost effectively. We are focused on spend intelligence throughout the supply chain. By enabling our manufacturers and distributors to see and understand how our product is moving throughout the SUBWAY chain, they can focus on areas of improvement and bring us new ideas for better service and product quality. This makes everyone a true partner with IPC and our franchisees.
Mueller: P&G will continue to invest in consumer-driven initiatives in 2008 and beyond. Among other initiatives, we are currently piloting a transportation forecasting solution that will enable P&G to more accurately predict how many trucks we need and where they should be. By reducing last minute tendering we will cut transportation costs. We are also testing an enhancement to Demand Sensing by adding a large retailer's POS data into the demand planning process.
Cooper: An exciting new IT advance that will officially launch in 2008 is the creation of global visibility across all our systems. Today, we have the data in separate systems. The Global Visibility system will integrate the data allowing clients to view their products via one system as they move throughout the supply chain.
We will be able to provide customers with "port-to-door" visibility by creating an interface that shows all our different systems including WMS, TMS and brokerage.
With this capability, our clients can access a full spectrum of information from our system and then make decisions about the information they need.
Symens: Although RFID and global data sync are not new technologies, we have found that fewer than one-in-twelve vendors have implemented these critical enabling technologies. We expect by the end of 2008, more than two-thirds of vendors will be participating in a GDSN program. Primarily because at the most recent leadership meeting, Wal-Mart declared in 2008 "form 33" (the manual alternative to GDSN) should not be used and that all vendors must begin using the global data catalog 1Sync.
Wal-Mart is supporting this initiative with buyer education and a toll-free number for vendors to learn how to get started. This will create a momentum in the market among Wal-Mart's 27,000+ vendors. We expect other large retailers to join in the wave of productivity and establish, or recommit themselves, to similar initiatives.
What is your overall prediction for RFID?
Symens: Sadly, we do not expect any significant adoption of RFID among vendors until at least 2010. Although RFID technology has the potential for significant process improvement and cost savings at both the manufacturer and retailer, the implementation costs are too high and the changes in business processes can be very disruptive without a very strong and committed management team.
Making matters worse there are numerous horror stories about vendors rushing at great expense to comply with mandated retailer RFID programs, only to have the retailer delay the program. This has resulted in considerable skepticism among CEOs about making a large investment into RFID. As a result, RFID will remain an enabling technology implemented at only the largest vendors for the next several years, which overall means a low adoption rate.