One of the most famous principles in retailing is, of course, “retail is detail” — this is where the challenge lies: how do you become more detailed and what detail should you focus on? All retailers know that having products available to customers is one of the most fundamental requirement. Manufacturing, distribution and selling a product can challenge the best organizations. As a retailer’s business drivers change, business processes, SCM technology investment and the overall approach to supply chain management must change and keep pace. An inefficient and poorly functioning supply chain can negatively impact every aspect of a retail organization, jeopardizing the long-term performance and success of a business.
To remain successful companies need organization-wide buy-in to supply chain excellence and some will need to re-evaluate their current processes and performance with these key trends in mind:
• Demand Planning
• Price pressures
• Shorter and complex product life cycles
• Online Collaboration
Companies that reevaluate their business and how the current supply chain structure supports the business-from a strategy, process, technology and organizational perspective-must focus on keeping their supply chain aligned with the overall business strategy.
To succeed, companies must embrace Supply Chain Excellence as a core competency at all levels throughout the company and recognize that supply chain management is executed in many areas, not just the functional supply chain organization.
Dynamics AX works closely with leading retailers and helps them address their business challenges. From our experience working with key companies in food and beverage, consumer products, high tech and industrial manufacturing, there are five key trends causing significant impact and change to retailers performance.
The demand-driven approach helps retailers to create a more customer-focused mindset, without sacrificing operational efficiency. I have often seen that Demand Planning success is often tied to organizational structure. Companies with the right tools and dedicated resources focused around demand planning and forecasting yield stronger results and drive more value to their business. I expect that demand planning will a very important feature to look into when the AX 2012 R3 is released.
Globalization and Supply Chain Management
The business landscape is rapidly becoming more global. Largely due to improvements in communications, globalization is dramatically impacting the way business is managed and transacted, even on the most local levels. No area of a business is affected more by the trend to a global business environment than the supply chain. Manufacturing, distribution, sourcing of materials, invoicing and returns have all been significantly impacted by the increased integration of a global customer and supplier base, and many companies find that existing processes and technology are not flexible enough for this new business environment.
Global competition and price pressures
The internet has changed our shopping habits and will continue to do so. E-commerce websites have opened up the world of “non-geographic” retail — a retail world without the need to visit the physical store. The emergence of “etail” from retail has been the biggest change over the past 20 years. Historically, price, product features and brand recognition were enough to differentiate many products in the marketplace. With the continued commoditization of many products, companies need better ways to distinguish themselves. Product innovation and brand equity is no longer allowing retailers to command a higher price in the market. In order to continue to compete with that commoditized product they made significant cost improvements with supply chain re-design and technology. Retailers are looking to their supply chains in two ways to help offset this trend. First, they are looking at ways to reduce cost and are creating a more efficient value chain to remain cost competitive. Second, retailers are looking at ways they can provide value-added services to meet the demands of more sophisticated customers.
Shortened and more complex product life cycles
As the economy becomes more global, labeling and compliance to packaging requirements and regulations have become critical to success. Without adherence to local packaging and labeling regulations a product may violate local requirements, preventing it from being distributed and sold in that market. Product lifecycle management technology and processes can help ensure that products being produced and targeted for specific markets are well-managed and are compliant. Product lifecycle management processes have helped retailers with their efforts to try to continually drive demand through packaging and labeling innovation and design. Implementation of an optimal PLM process and technology can allow retailers to effectively produce and distribute products that are only targeted for regional promotions or consumer preferences.
Integration and collaboration with customers and suppliers
As supply chains continue to develop and mature, a move toward more intense collaboration between customers and suppliers has occurred. The level of collaboration goes beyond linking information systems to fully integrating business processes and organization structures across companies that comprise the full value chain. The ultimate goal of collaboration is to increase visibility throughout the value chain in an effort to make better management decisions and to ultimately decrease value chain costs. With the right tools, processes and organizational structure in place, collaboration provides key people throughout the value chain with the information needed to make business-critical decisions with the best available information. As retailers are increasingly using their supply chain to compete and gain market share, spending and activity in this area are notably on the upswing. Technology and process upgrades at forward-thinking companies clearly show that supply chain excellence is more widely accepted as an element of overall business strategy and that increasing value to customers is not just management’s, but everyone’s business.
Technology supporting these trends
As supply chain networks have become more complex, the need for greater and improved solutions has become critical. The Dynamics ecosystem have done significant investments in developing solutions and verticals to address the needs of retail and distribution companies in areas, such as:
• Transportation and Inventory Optimization
• Logistics and replenishment Optimization
• Product Lifecycle Management and labeling
• Handheld solutions
• Sales and Operations Planning
• Manufacturing Optimization
• Business Intelligence
• Collaboration platforms
These technologies have helped enable the retail and supply chain “information worker” innovate, drive cost reductions, improve service and meet customer expectations better than ever. In order to have sustainable improvement in retail and supply chain performance, the Dynamics ecosystem must find the right balance of investments in organization, processes and technology. Lack of investment and focus in these areas will reduce the ability to achieve fundamental, sustainable improvements.