Supply Chain Transformation: Before You Start
Supply chain management was once a relative backwater, but in recent years it has moved decisively center stage. A well-managed supply chain operation is, increasingly, a critical factor, even the critical factor, in a business’s success. This guide to supply chain transformation leads you through the process of aligning retail and supply chain planning with a business’s strategic goals, all the way to technical implementation.
Transforming a supply chain operation and bringing it up to date generally involves not just the introduction of powerful new technology but a fundamental review of processes and organization.
There is no single ‘right’ approach, but what is common to almost every successful transformation is that it seeks to align the supply chain with the company’s overall goals. For many businesses, finding the right supply chain system plays an essential part in identifying the steps they need to take to optimize their supply chain so that it better serves their business needs. If you are thinking of sourcing supply chain technology, especially a supply chain management system that encompasses demand planning and analytics, take some time to assess the available options.
Start by asking the essential questions – especially of yourself.
Tip: The most important question you’ll want to ask yourself is, undoubtedly, ‘what do we want to achieve?’
It could be more streamlined processes, better availability, lower inventory levels, less spoilage, less manual work, better forecasting of campaigns and promotions, better ramp downs and, ultimately, higher sales and higher profits. But it helps to identify one or two KPIs that are the most important and, by which, success can be measured. Those KPIs tend to reflect a company’s overarching business strategy.
In this guide we’ll be looking at those areas that, in our experience, are the most important to consider:
- Is supply chain transformation something you should be working towards now?
- How do you organize your replenishment operations?
- What does leadership mean in the context of a supply chain transformation project?
- Do you develop a solution in-house or look outside for a supply chain systems specialist?
- How to structure your project?
With supply chain so high up the business agenda these days, and with it being so critical in the face of ever fiercer competition, this is an issue every business must face sooner or later!
1. Supply Chain Transformation: What’s It All About?
Why You, Why Now?
There are two reasons that really stand out. Firstly, you could be saving money, and quickly.
Tip: In any move to optimize supply chain operations, there are almost always a number of ‘low hanging fruit’ – issues that are relatively straightforward to fix and can, if resolved, produce measurable results, fast. You can save money and give a transformation project real momentum by identifying quick wins.
Secondly, whether or not you optimize your supply chain, there’s every chance your competitors have or will. The big retailers, and in particular the giants of e-tail, are revolutionizing supply chain and standards of fulfillment. Consumer expectations are constantly being driven higher. The purchases they make are increasingly affected by availability, price, assortment and speed of delivery. You can improve all of these, helping you keep or gain a competitive edge.
What Is Supply Chain Transformation Really About?
The supply chain transformation process is primarily about aligning the supply chain with your overarching business goals for maximum efficiency. And in practice it’s not so much about materials flows as changing responsibilities within the organization, and that requires a step-by-step, strategic approach.
1. Be clear about your main strategic business goals. In order to transform its supply chain, a business should have a clear commercial vision. Whether it’s a niche retailer, a discounter, all about quality, service or availability, whether it aims for depth or breadth of assortment, sets trends or responds to them, it should decide on its goals and orientate its supply chain operations around them.
2. Let your strategic goals shape your supply chain goals. By asking questions about strategic positioning, such as where the retailer’s competitive edge is and how that is formed, it leads to a second set of goal-related questions about sourcing; ‘What do we want to provide our customers?’, ‘Do we need stock to last the whole season or longer?’ ‘Do we go for low cost – long lead time, local and short lead but at higher cost?’ or a mix, etc. These questions lead to any number of category management, buying, merchandising and campaign-related supply decisions.
Then comes the transformation to pull the whole supply chain into alignment with those goals. Ultimately it’s the decision making or planning responsibilities that are being transformed.
3. Aim to develop well defined planning processes. When implementing a supply chain solution, people tend to look for better control, better transparency, a greater ability to influence the actual supply chain. There need to be well defined planning processes to get the full benefits of the transformation. If those aren’t in place they need to be created and implemented.
Tip: It really helps if businesses are willing to consider new ways of working (We discuss one of these, organizing your replenishment operations and team, in chapter 2).
And yet, occasionally, all a business wants to do is automate its existing supply chain. But if a process isn’t working well, then automation won’t improve it. It simply allows that sub-optimal process to continue out of sight and out of mind with even less thought being given to what’s not working. As one great business leader once said “automating stupidity just gives you stupidity, automatically.”
Just because something has always been done in a certain way doesn’t necessarily mean that it’s the best way.
It’s a People Thing
Transforming the way colleagues think about the supply chain, their place in it and how they work is critical. Getting your fellow workers, particularly those at the sharp end, onboard and involved is often the difference between mere implementation and real transformation.
Tip: Companies with one or more good super-users implement faster, more effectively and get better results. Someone on the inside who really understands the business and the system can ensure the supply chain planning solution is a seamless extension of a business’s operations. Being able to drive the system from within the organization means that the supply chain team can translate colleagues’ expertise into automated processes faster, implement changes as they’re needed and keep the communications chain short.
Tip: Let your system and people do what each do best. Intuition and experience are better than nothing in the absence of hard data but hard data trumps intuition almost every time. Humans can’t keep week-by-week sales for thousands of SKUs in mind. A good system can, effortlessly. Humans understand other humans far better than computers. Let each play to their strengths.
Tip: Free experts to use their skills. There’s no point letting your experts get bogged down in routine repetitive work when it’s easy to automate. Let colleagues focus on tasks that can’t be automated but that improve the bottom line; their expertise in sourcing new products or suppliers, negotiating the best deals and keeping an eye on the market, all add real value.
But don’t forget – managing the human dimension of any transformation project is almost always the toughest task and takes leadership skills and sensitivity. More in our next chapter.
From Strategy to Targets
Particular targets, in terms of availability, inventory levels, purchase and logistics costs are largely determined by your overall business strategy. Right from the outset, way before you even commit to implementing a particular system, you should be working closely with a solution provider to ensure that they understand your goals and that the system will reflect them properly.
Try to define these goals as closely as possible, especially their relative priority. So, is your primary aim to offer full availability, reduce capital investment in stock or reduce the logistics costs – and what is the order of priority of your various targets?
These goal might even be given a different weight within a subsidiary business, certain categories or even at regional/individual store/SKU-level, etc.
Benchmarking your progress is also really helpful, just to ensure your strategy is on track. There are regular KPIs, such as inventory, availability, spoilage and so forth. But in terms of organizational and operational efficiency, while many of the gains are intangible – store staff having more time to spend with customers for instance, or less stressed warehouse and supply chain teams – there are still good indicators.
Tip: Track your progress by keeping tabs on staff hours used for given tasks before, during and after the transformation.
You can measure how fast you are able to make changes in the supply chain such as planning a campaign, a new store opening, a Christmas season. For example, whereas previously a three-person team took two months to plan deliveries and supply chain operations for Christmas, after the transformation, it might take a two-person team a week.
2. Organizing Your Replenishment Operations
Some businesses already have an organizational model that they are happy with and would rather refine it than make outright changes. They may already be using replenishment software and are simply looking for improved or more integrated functionality.
However, it’s often the case that supply chain transformation initiatives often prompt organizational changes. So a key decision for retailers, arguably the most important one in organizational terms, is whether to use a centralized or decentralized model for replenishment planning and purchasing.
The Decentralized Approach
There are circumstances when a decentralized approach is wholly sensible. For instance where:
- Stores have a degree of autonomy to alter order proposals – generally the only decentralized option countenanced by large retailers.
- Ordering in a multinational company is done by a diffferent team in each national territory – local knowledge and potential language difficulties may be important considerations.
- Product managers, rather than a dedicated specialist purchasing team, are entirely responsible for ordering – not an uncommon situation in the wholesale sector.
So where businesses decide a decentralized model works it’s generally because it has advantages in their particular circumstances. For instance:
- It can help subsidiary companies or local operations retain their individual character.
- It can increase the accountability in the stores, when they have the final decision making responsibility.
- It can work better for franchised businesses.
The Centralized Approach
In many cases companies we’ve worked with have been able to centralize much of their supply chain decision making. This centralization is almost always decisive as it allows the company to bring all its expertise to bear through effective systems with the ability to respond faster to any situation. The central team has an overview of the whole chain and much closer control of material flows across the board.
The building of central replenishment teams is a broad trend amongst businesses. Today it’s widely considered ‘best practice’ as it’s highly effective and has numerous advantages.
- Good for companies wanting to bring a degree of uniformity to wide ranging national or multinational operations.
- Helps get maximum benefit from latest ‘in-memory’ powered planning and analytics tools.
- Brings together a critical mass of skills and knowledge and creates a good environment for sharing both.
- Centralization is essential for system development and support (ideally with a nominated super-user to lead it)
- Makes it easier to cover in the event of leave, illness or colleagues changing jobs.
These days the centralized approach is broadly considered best practice. In the absence of contrary factors the case for centralizing the supply chain team, and with it inventory planning and replenishment, management is very strong.
In large retail companies, good organizational structure generally means that there is a super-user team. In very large retailers with multi-billion-dollar turnovers and with hundreds of stores, purchasing teams are often quite large. There might be 2-6 super-users within that team because the scope of use is just so wide.
Super-users should receive appropriate training. It’s often more effective where super-users have come from different parts of the organization, because team members bring a breadth of knowledge that they share with one another and that helps in crafting solutions for a wide range of challenges.
Even if a business has chosen, for well-considered reasons, to pursue a decentralized approach and allocate super-users to its supply chain teams in different regions, countries or subsidiaries, regularly bringing super-users together helps the exchange of knowledge and ideas.
Processes and Organizational Changes Often Go Together
When businesses decide they need to review and rework their processes, if often follows that the organization needs to be reconfigured to reflect new chains of responsibility or working teams.
For example; where individual stores have their own manual ordering process, a typical supply chain transformation response will be to centralize ordering. Stores keep responsibility for monitoring inventory levels and ensuring new stock gets on the shelves quickly.
Another example; product allocations to stores. In some companies the merchandise planning team takes care of pre-season ordering. The replenishment team handles daily replenishment and allocation to stores. It takes responsibility for the close management of stock but leaves the more strategic management to merchandise. Other companies have a single team that simultaneously places orders and calculates how that stock will be divided between outlets.
We recommend in most instances a centralized planning team. The model is being adopted across retail and wholesale, for good reasons. The examples above are just two from a host we’ve encountered that illustrate the logic of centralization.
The right technology and a skilled team of supply chain experts that know how to use it consistently outperform the instincts of even the most experienced store managers when it comes to forecasting for routine replenishment, promotions, seasons and campaigns.
There are, as outlined above, sometimes good reasons to use a decentralized model. Those excepted, the centralized approach is generally agreed to be industry best practice. For more detail see our whitepaper on getting the most out of your inventory management team.
However, where there is a compelling case for decentralization, it may still be that some, high-level aspects of the operation are still best centralized, such as system development and support. Likewise there is a strong economic case for co-ordinating and consolidating buying to maximize bargaining power to strike more advantageous deals.
A good system can be adapted to deliver the best of both worlds to companies that run different retail chains, or where different territories remain highly distinctive or, where there are franchisees and where some local autonomy is important.
3. Leading Your Initiative
We’ve highlighted three clear steps to defining what supply chain transformation means for your company: identifying and working towards your business goals, your supply chain goals and the planning processes needed to deliver them. We’ve looked at organizing your supply chain team, and touched on the fact that reorganization often follows process changes, and vice versa.
Having settled on your vision for supply chain transformation you’re sure to encounter a fair few challenges as you forge ahead. Some are more significant than others but in most cases resolving them is simply a process.
The issue that gets raised raised time and time again is:
Winning support from colleagues for a supply chain transformation project. This is far from being a simple, straightforward process. Change management is one of the most challenging tasks business executives have to deal with. Bringing your people with you requires leadership. But with skill, and experience it can be done and it really can be transformatory.
Ultimately, if you master the art of change management, you’ll reach a tipping point where the push will become a pull. You won’t be telling people they have to do things a certain way, they’ll be showing you just what they can do with the tools and processes you introduce. They’ll have taken ownership of the system and the supply chain transformation process.
So Where Do You Start?
There are two dynamics typically at work. One is top down and the other bottom up and they are reflected in two distinct leadership roles involved in a good supply chain transformation initiative. We refer to these as ‘the leader’ and ‘the champion’.
The leader is the person who drives through the project top down whereas the champion provides vital impetus bottom up. One person could take on both roles. Equally a project could have more than one champion. However, ultimately, for the sake of clarity and efficiency, it generally helps to have a single person assume the role of leader.
Tip: Find a project leader who can straddle the business and technical sides of the project.
The project leader needs to understand the business’s goals, why those goals are important and keep them at the centre of the project. We’ve worked with great project leaders who don’t have technical backgrounds. However it’s a big plus if they’re prepared to engage with and get stuck into the technical aspects of the project. Such people get the best results in the fastest time because they’re not afraid to get their hands dirty. They also need good interpersonal skills. It is their job to keep senior management onboard, to keep their team happy and motivated, and to forge a great working relationship with the technology supplier and, in some cases, third party vendors and IT subcontractors.
Where should the leader come from? It could well be the person who drove the decision to undertake the supply chain transformation in the first place. Another obvious choice would be someone, probably senior, from the supply chain team. That could be one and the same person. In any case they should be working very closely with the supply chain team as it’s doing the heavy lifting and this is, in many ways, its project. It should be shaping the current plans, taking a view on what sort of changes are essential, where restrictions apply and what cannot be touched. However if there’s someone with great personal and organizational skills who is genuinely determined to get grease under their nails on the technical side then the leader could be drawn from outside the supply chain team.
Tip: For a transformation project to succeed, it needs the backing of an organization’s senior management.
Typically, the earliest conversations are with whoever is ‘in pain’ at the time, operationally speaking. That might be the CFO wanting to free up capital by reducing inventory or cutting costs, or it could be the Supply Chain Director who’s trying to respond to a whole range of requests in areas where he has insufficient control. That senior figure within the company could be the project leader themselves or, as an ally, play a key part in making the case to the board.
Tip: Making a business case that shows the project will improve profitability, and demonstrates that risks are low and manageable, generally wins the board-level support a project needs.
Something to bear in mind; we worked on a case where some of the senior people were concerned as much with guarding their own turf as with the wellbeing of the company. Their teams enjoyed a huge degree of operational autonomy and they all worked differently. Though it was decided to centralize supply chain planning and processes, it was a huge effort to convince each department to come on board. What was lacking was someone at the top who could say; ‘This is what we need to do and this is why we need to do it.’
When you get this “silo” mentality, people sometimes think about their own goals regardless of whether those support the business’s overarching goals or assist the dynamics between teams and their operations. A system does not resolve this, but it does give you powerful tools to do so, such as allowing everyone to work with a single set of numbers. Then, if the promotion planner does something, the supply chain and category manager can immediately evaluate what kinds of results it will lead to.
Tip: Collect and organize your data, analyze it, make your case. Good leadership allied with good data helps get people onboard with a supply chain transformation.
And good data provides a strong basis for good communications. Colleagues may say; ‘We’ve always done it like that’ or ‘We know our area best, you just take care of yours’, but numbers and projections allow you to respond to opinion with hard data and that makes it much easier to find common ground or make compromises.
Tip: Remember that people often relate to their peers more closely than their superiors.
If the role of the leader is to manage and motivate top down, then the job of the champion is more ‘bottom up’; nurturing the project’s roots so that colleagues at the sharp end grow and thrive. The roles are different but we know people who have been both great leaders and champions within their projects.
Being a supply chain transformation champion means listening to the concerns and taking care of the needs of the people who are going to be affected most directly by the transformation. Overwhelmingly that will be people in stores, especially store managers, who find that their roles change.
Ideally you will find a supply chain transformation champion, or champions, who understand and empathize with those who feel they have most to lose or who are most apprehensive. They should be someone who can show them the way to a better future. A great supply chain transformation champion will have great powers of empathy and/or will have experience of working in those parts of the business most profoundly affected by the change such as stores.
She or he will need to persuade colleagues by giving them a vision about how their life will be afterwards; show them what their role will be and how they will be needed in the supply chain operation that’s coming in.
One great suggestion we found was to invite people, possibly by sending out a general email, to become early adopters and champions. Those that respond quickly and enthusiastically are likely to be great candidates.
Tip: Don’t make change feel like a judgement on people’s performance. People hate it when something familiar is taken away from them even if they didn’t really like it. If you’re not careful you can send a message of ‘mistrust’ that’s interpreted as ‘we’ve got a new system that’s better than you are.’
If colleagues feel their own worth has been undermined they may try to show that their old roles cannot be automated and that the system can’t do the job. They will always be able to find a few cases to make their point.
And being right isn’t always enough.
In one implementation we worked on, the regular buyers went off for a month’s break. As their deputies were rather less familiar with the operation they chose to run the system on full automation throughout the holiday period. Everything was perfect. But once the regular managers came back, the situation deteriorated again because they made the same mistakes they always did.
But you can’t get back on track by making people feel bad about the change, and by highlighting their mistakes when they protest. This is doubly true if you’re taking away responsibility and replacing someone’s expertise with a computer because it can affect their status and sense of worth.
Tip: Think carefully before choosing full automation; we rarely recommend it.
A good transformation champion will appreciate the local knowledge store managers offer (for instance about upcoming events – matches, festivals, concerts etc. that could affect demand) and ensure that there’s good communication. Store managers will sometimes retain order approval, or perhaps control a long list of items and categories, at least while colleagues are learning to trust the system (and also because systems work best with human feedback). Interestingly, in some parts of the world, it’s our smaller customers who look for higher levels of automation. Larger companies everywhere typically like to give more control to their supply chain experts.
Tip: Give colleagues a personal goal. Company goals are critical but, to individuals, those can seem rather remote and intangible.
One of the very smoothest implementations we worked on had a project key lead / central replenishment planner who, having worked in the stores, understood keenly what store operations looked like and where their supply chain pain points were.
He was able to communicate really well with the store staff, the ultimate customers for the transformation project. That helped get them on board. And that is critical because store staff ensure stock is available on the shelves for customers, that the numbers in the system are right, that inventory levels are correct and that sales are registered properly.
And there is a great future for store staff. A transaction in store is still made between customer and store colleague. If they’re really committed to customer service, they will also see the benefits of having the right amounts of the right products and they’ll appreciate having more time with customers.
Tip: Look for potential quick wins and implement them – they’re very important and motivate the team and so help immensely in change management. Getting an early win shows people that the project has value and that they are actually doing and gaining something. Too many people have seen projects that once started were never heard of again. So it’s really important to show as early as possible that this is actually leading somewhere.
4. Choosing a Supply Chain Planning System
Optimizing your supply chain, and developing your processes and organization step-by-step, each one thoroughly considered, all requires the analysis of large quantities of data. Thankfully excellent software has been designed for this very purpose. So having decided to proceed with your supply chain transformation process, it’s important to evaluate whether your existing system (if you have one) is suitable for the task. Can it handle your expanding business and supply chain needs or be upgraded to do so? Or do you need to consider replacing your existing system with a more modern, more powerful, more agile solution to support and serve your supply chain planning processes better, now and in the years to come?
Do You Develop In-House or Look to a Specialist Provider?
Tip: Weigh up risks and costs of developing an in-house system versus a third party solution.
Businesses generally have a clear idea of their core competencies. Some want to take on the challenge of developing an existing ERP or supply chain management system or even of building one from scratch.
Many companies have a skilled IT department that can implement a new system and adapt it to that business’s needs. However, it’s an additional step to employ and maintain a specialist team of analysts to develop replenishment and forecast models and implement new replenishment and forecasting concepts. The knowledge and skill levels required are quite high. A company needs to satisfy itself that there is a business case and many decide that it is a distraction from their core operations.
Updating or developing an existing system may be attractive because it is familiar and it affords total control. Conversely, from a point of view of predictability and commitment, the risks may well be lower with a third-party system provider.
You are taking on a system that is already developed and that you should be able to see working in a comparable environment. Additionally, with a modern SaaS model you shouldn’t be tied in. Good providers allow customers to quit at 1-3 months’ notice. Once funds have been committed to an in-house project it can be hard to put aside if, as it progresses, its performance is not optimal.
Tip: If you’re evaluating third party systems you will want to draw up a list of questions to put to any vendors whose systems are in contention.
A good starting point would be; ‘is what we are looking for something you have successfully implemented with other companies?’ and ‘Were they facing similar challenges?’ Because if they’ve already overcome those challenges, either wholly or in part, then they’re already a long way down the road to solving your own.
You might also ask to what extent and at what level it’s possible to make changes to the system without referring back to the vendor. That’s critical because updating systems, as your business, the market or retail technology develops, can involve considerable development resources. If you find yourself highly dependent on a provider’s support to operate and adapt the system, then you are at risk of incurring substantial additional costs.
Tip: Look for system providers that have already helped companies like yours with challenges like yours.
To put that proposition to the test, look for as many commonalities as possible with existing users of any given system and then ask to talk to those users or meet them. A vendor confident of its supply chain technology and expertise won’t try to act as gatekeeper. It’ll happily make the introduction and leave you to talk.
It’s also quite important to pay attention to the questions the software vendor is asking of you. Are they really trying to understand your unique situation or are they just regurgitating some rules of thumb as along the lines of ‘just follow these five simple steps and everything will be better.’ Often if a proposed solution to a really challenging problem sounds so simple that it’s almost too good to be true then chances are that it is too good to be true.
Tip: Satisfy yourself about the flexibility and adaptability of any system. Even if you find software that meets all your needs today you need to know it will still do so in a year, or two, or five. You probably can’t specify future needs now so a solution needs to be inherently flexible enough to be configured to each possible new challenge as it arises.
Another important question, both for yourself and the vendor: “is this a pure, system-upgrade IT project or is it also about process optimization?” If it’s the latter, you should satisfy yourself that the vendor has experience in this field and that they’re proactively engaged and making suggestions.
There should be a degree of positive, friendly, creative tension between vendor and customer. It’s neither optimal if the vendor does all the things the customer asks nor if the customer follows 100% what the vendor is saying. The ideal is a dialogue in which both parties challenge one another whereby together they end up with the best possible solution.
5. Structuring Your Project
So, you’ve made your decision! You’re committed to transforming your supply chain. You’ve engaged with your colleagues and made the case to them and they’re with you. Now it’s time to deal with the nuts and bolts of structuring the upcoming implementation.
Software implementations used to be potentially fraught with problems such as time and cost over-runs. The traditional model involved specifying almost every aspect in advance and as systems were often hard to adapt that would often lead to problems when changes were needed.
These days the best software is designed so that it can be adapted easily to the needs of the end user. The more flexible the system the less likely delays and extra expense becomes.
One should never expect a system implementation and supply chain transformation to be without challenges, it’s a serious undertaking, however many pitfalls can be avoided by structuring a project well.
Analyzing Your Business Case
A ‘pre-implementation study’ or analysis phase involves running your existing sales and stock data through a candidate system (albeit one that’s not yet configured specifically for your needs).
If you are choosing between a number of potential solutions, it provides a useful comparison. However, bear in mind that the more a system is able to be configured and adapted around your operations and goals, the greater the potential performance gains are likely to be.
It’s also a great way of highlighting supply chain pain points, shortcomings in data, easy wins and so forth early in the process.
If there’s any remaining doubt whether or not there is a business case for supply chain transformation, this phase will provide essential hard data before you commit to a particular course of action.
Tip: If you ask vendors to calculate the business case, pay attention to the methodology they use to arrive at the figures they present. It’s also a good way to compare different proposals.
To illustrate: ‘We saved 20% for Company X so we can save 20% for your organization’ isn’t as convincing a business case as using a more bottom-up approach. Being able to say ‘you can save $15,000 here because $5.60 saved per item with this particular SKU store item across 2,680 units adds up to ~$15,000,’ is far more convincing. A good supply chain system isn’t a black box. A good vendor can and will be transparent. Ask hard questions and demand hard facts.
However, there are cases where a business might choose to dispense with an analysis phase. For instance, if the potential gains are really obvious then moving ahead now rather than taking six to eight weeks for an analysis phase simply means that the businesses reaps the benefits that much earlier.
In our experience the savings that can be made in the time that an analysis phase takes can often pay for the entire implementation and the first year’s license.
Architecture is generally fairly straight forward. It’s simply taking decisions about where to pull in data from and where to send it. In some cases data is coming from several systems and part of the process is rationalization, deciding where to bring it all together and collate it. The two most common options are:
- The ERP system. This is the default option as it’s the backbone of most companies’ IT architecture.
- The PoS system. Where there are multiple PoS systems a business might choose to integrate them via the supply chain planning system rather than the ERP.
Integrating supply chain planning software with an existing ERP or PoS system will depend on the system you choose but in our experience either one is almost always a straightforward process and considerably quicker than customers expect.
If you haven’t already got to grips with your master data, then you’ll need to do so as you move into implementation. In short your output data will only be as good as your input data.
You’ll need to cleanse and organize your historic supply and sales data for use in planning and forecasting. There’s no disguising the fact that sorting out master data can be a big undertaking however ultimately it’s a definable and executable process.
Typically, most businesses in North America and Europe have reasonable inventory data through their use of PoS systems. However, we occasionally encounter more serious challenges, for instance where there are multiple PoS systems in a business’s chain perhaps as a result of a franchise operation or of growth through acquisition.
Master data is a sufficiently important topic in its own right that we cover it in some detail in a blog post written to accompany this guide.
Once the supply chain planning system has been integrated with other core systems and master data has, as far as possible, been cleansed and ordered, it’s normally time to proceed with the implementation.
In an agile implementation (i.e. where software and processes can both evolve and adapt in response to any issue or event) several things tend to happen in parallel. Categories, stores or vendors are taken onto the system a few at a time. Users are trained within the supply chain team and in stores. Training is an ongoing process as is system testing. Customers should be setting the timetable and we find that most do, going quickly or cautiously as best suits them.
But development shouldn’t and doesn’t stop at full roll out. An agile system lends itself to constant adaptation by your own super-users as the business moves forward and its needs and processes change. Rather being apprehensive of a ‘never-ending’ development process this should rather be seen as a major positive. Systems that don’t adapt as businesses grow sooner or later need to be replaced.
Conclusion: Final Thoughts
This is a time of great opportunity for supply chain professionals. Never before has so much attention been focused on their ability to save costs and add value. Never before has the success or failure of retail and wholesale businesses rested so heavily on their shoulders. Supply chain excellence is now the criterion by which many companies stand or fall.
Supply chains are being transformed and are delivering:
- Better visibility of sales, inventory and supply chain
- A greater degree of control
- Greater integration of operations, processes and technology with business goals
While this means that supply chain experts have become hotly sought after and have ample opportunity to shine, it also means that competitor businesses are doing the same. Doing nothing is not the default option.
Luckily the process of transforming your supply chain is no longer as daunting as it was even a decade ago. Supply chain technology is evolving rapidly. Systems no longer have to be monolithic, hard to adapt and hard to walk away from. They can be evaluated, implemented and have paid for themselves in a single business cycle.
Retailers are, on average, upgrading their systems every 10 years, so even if you have supply chain technology in place it may not be very long before you think of renewing it.
So we’ll leave you with a few things to think about before you start your supply chain transformation project:
- Define what you want to achieve and then watch those KPIs.
- Have a management steering group that includes the decision takers you need to hand, and that understands the ‘why’ of the project.
- Continuous measurement of the system and ongoing fine tuning. Again, keep watching the KPIs.
- Have a good super-user (s) with analytical skills and enough time to spare. You’ll take control faster.
- No one ever told us; ‘I wish I’d spent less time communicating change to stores and throughout the organization.’
- Have realistic expectations. The benefits could be huge but you’ll need to be prepared to work for them.
- You’ll need to get your master data up to date during the implementation. Responsibility for the task needs to be clearly identified.
- Make sure you check the numbers and have them to hand to make the case if colleagues in stores question decisions.
- A lot of the really important things are actually quite simple. There’s not much mystery involved, it’s more about focus on the essentials. Focus on the things that actually matter.
Supply chain transformation FAQ
1. What is supply chain transformation?
Supply chain transformation is the intentional act of transitioning supply chain processes to digital technologies. The goal of digitization is to optimize a company’s supply chain to be more agile, adaptable, and efficient to reduce costs and bolster profit margins.
2. What are the benefits of supply chain transformation?
The move to digital technologies and processes allows companies to gain higher visibility into their supply chains and react more quickly to disruptions and shortages. This visibility also enables companies to better align with trading partners on matters of promotion planning, logistical bottlenecks, and more.
3. Is centralized or decentralized replenishment planning a better option?
Centralization of supply chain decision-making enables organizations to consolidate expertise into a single team. This team will have better visibility of the entire supply chain, allowing them to facilitate more efficient processes and reduce the time it takes to react to challenges. Because of this, it is often the most efficient way to operate.
But there are several instances when decentralized planning makes sense for certain companies. Many companies may see the benefits of centralized management but are not yet equipped to make the transition due to budgetary or time constraints. Additionally, some product categories are often managed by stores due to a lack of data. Either way, a robust planning system should be flexible enough to support and automate both centralized and decentralized operations.